Physicians, Protect Your Assets against these Tax Scams

As tax time approaches, physicians must be aware of two types of dangerous tax scams: the ones that target you and the ones that make you an unwitting criminal.

Many of my past discussions cover legal tax planning as one of the four core pillars of asset protection and caution readers against the abuse of otherwise legitimate tools like captive insurance companies and offshore banking for the wrong reasons. This week, we summarize the 2017 IRS  "Dirty Dozen List" as a final reminder before you file your taxes.  No matter how good the sales pitch was or who helped put the plan together, the liability (both civil and criminal) for filing an inaccurate return is always yours as the taxpayer.

Tax Scams That Make You the Victim:

Phishing: Taxpayers need to be on guard against fake emails or websites looking to steal personal information. The IRS will never initiate contact with taxpayers via email about a bill or refund. Don't click on one claiming to be from the IRS. (IR-2017-15)

Phone Scams: Phone calls from criminals impersonating IRS agents remain an ongoing threat to taxpayers. Con artists threaten taxpayers with police arrest, deportation and license revocation, among other consequences. (IR-2017-19)

Identity Theft: The IRS continues to aggressively pursue the criminals that file fraudulent returns using someone else's Social Security number. Be aware that physicians have been specifically targeted because they often filed extensions, giving scammers a six-month head-start. (IR-2017-22)

Return Preparer Fraud: Be on the lookout for unscrupulous return preparers. Most tax professionals provide honest high-quality service, but there are some dishonest preparers who set up shop each filing season to perpetrate refund fraud, identity theft, and other scams. Know who you are dealing with. (IR-2017-23)

Fake Charities: Be on guard against groups masquerading as charitable organizations to attract donations from unsuspecting contributors including fake charities with names similar to familiar or nationally known organizations. IRS.gov can help your check out the status of charitable organizations. (IR-2017-25)

Inflated Refund Claims: Taxpayers should be on the lookout for anyone promising inflated refunds. Be wary of anyone who asks taxpayers to sign a blank return, promises a big refund before looking at their records, or charges fees based on a percentage of the refund. Fraudsters use flyers, advertisements, phony store fronts and word of mouth via community groups to find victims. (IR-2017-26)

Scams That Make You the Criminal:

Excessive Claims for Business Credits: The fuel tax credit is not available to most taxpayers and is usually limited to off-highway business use, including use in farming. Taxpayers should also avoid misuse of the research credit. Bad claims often fail to participate in qualified research activities and/or satisfy the requirements related to qualified research expenses. (IR-2017-27)

Falsely Padding Deductions on Returns: Do not overstate expenses or falsely inflate deductions such as charitable contributions, business expenses or improperly claim credits such as the Earned Income Tax Credit or Child Tax Credit. (IR-2017-28)

Falsifying Income to Claim Credits: Don't invent income to erroneously qualify for tax credits, such as the Earned Income Tax Credit. Taxpayers are sometimes talked into doing this by con artists. Taxpayers should file the most accurate return possible because they are legally responsible for what is on their return. This scam can lead to taxpayers facing large bills to pay back taxes, interest, and penalties. In some cases, they may even face criminal prosecution. (IR-2017-29)

Abusive Tax Shelters: Don't use abusive tax structures to avoid paying taxes. The IRS is committed to stopping complex tax avoidance schemes and the people who create and sell them. When in doubt, taxpayers should seek an independent opinion regarding complex products they are offered. (IR-2017-31)

Frivolous Tax Arguments: Promoters of frivolous schemes encourage taxpayers to make unreasonable and outlandish claims even though they have been repeatedly thrown out of court. While taxpayers have the right to contest their tax liabilities in court, no one has the right to disobey the law or disregard their responsibility to pay taxes. The penalty for filing a frivolous tax return is $5,000. (IR-2017-33)

Offshore Tax Avoidance: The recent string of successful enforcement actions against offshore tax cheats and the financial organizations that help them shows that it's a bad bet to try to hide money and income offshore. Offshore tools are legal if you follow the law and disclose them, but most have no tax benefit. (IR-2017-35)