When I write in this space about tax scams, it is almost exclusively with an eye toward protecting you against unscrupulous criminals. The IRS, however, has been putting out a lot of information in its “Dirty Dozen” scams list, and it made me realize that there are different angles when it comes to taxes and scams. For although there are many criminals from the outside using the general structure of the tax system to take advantage of people, there are also unscrupulous people trying to take advantage from the inside, too.
Some of these are may only arise out of ignorance or faulty information. The IRS has labeled these as “frivolous tax arguments,” which can be used to try to get out of paying taxes. I can’t say this is something I run into that often (which makes sense, no one is coming to me to not pay taxes), but the agency lists the following as some of the most common:
What this boils down to is that you have to pay taxes. For all the loopholes one may hear talked about within the system, there is not a magical one that leads to a world where you don’t have to pay at all.
Even if you file taxes, though, doing things wrong within your return can also be seen as a scam. Some obvious ones that everyone can imagine are claiming expenses or deductions for which you are not eligible. What about claiming extra income, though? This doesn’t seem as obvious, but there are some tax credits for which some extra income could quality you for a larger credit.
With deductions, it is understandable that if one were preparing their own tax return, you could misread a tax rule (possibly with a hopeful, optimistic bent) and believe you are doing things correctly. If one was to alter their income, though, that is a little more willful by its nature. Both cases, however, would result in the submission of a tax return that can open you up to penalties and a bigger bill than you would have had if you just filed a legal return to start.
This brings me back to the “loophole” idea. It’s a term that is so often used that it almost feels like it is okay to look for ways to beat the system. The problem is that you can’t beat the system, but you can work the system to your greatest advantage. There are no secret tricks, just good strategies. I cannot claim that every small fudging of numbers of a return is going to trigger an audit, but if something does trigger it, you want everything to be legitimate.
There are things we can do with tax planning and preparation that can make a return look better than you may have thought it would. These aren’t tricks, though, and these aren’t scams. It is simply the value of having someone on your side who knows how to legally get you all that should be yours.
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