Watch Out for Abusive Tax Schemes



Many taxpayers get trapped into participating in illegitimate tax schemes and end up with tax troubles. Tax frauds use various methods to either steal a taxpayer’s financial and personal information or dupe them into sharing their tax information so that they can carry out tax theft. Some of the popular abusive tax schemes are abusive foreign trust schemes and false billing schemes.

Abusive tax schemes violate the Internal Revenue Code, but since most taxpayers are not aware of all the various tax rules, fraudsters often succeed in convincing taxpayers to participate in fraudulent schemes. Many illegal schemes use the mask of trusts, Limited Liability Companies (LLCs), International Business Companies (IBCs) and Limited Liability Partnerships (LLPs), and foreign financial accounts to hide their illegality.

Often, fraudulent schemes try to attract taxpayers by offering a reduction in taxes, or sometimes even elimination of the entire tax liability. To achieve that, they use illegal means such as hiding unaccounted income. Many fraudulent schemes run away with taxpayers’ money.


Taxpayers who wish to participate in trusts and tax schemes must ensure that they are legitimate before they share their financial and personal information with anyone. Fraudulent charities also dupe taxpayers into donating and sharing their tax information. Before donating, participating, or sharing tax information, ensure that the people and the organization are legitimate. In most cases, a quick online research and a call to the organization is sufficient to judge whether it is legitimate or fraudulent.

It is best not to entertain cold calls or strangers appearing at your doorstep promising tax reduction. Their identity and purpose cannot be known. The simple rule of not sharing sensitive information online or with strangers can help taxpayers save themselves from fraud.

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