IRS Scams Investigations to include Pensions, Insurance & Digital Currency

For about 20 years now, the IRS has been annually publishing a ‘Dirty Dozen’ list of common taxpayer “scams.” The intent is to warn taxpayers, tax professionals, financial institutions, and financial advisors of abusive transactions, including bogus tax avoidance strategies as well as consumer-focused scams that target average taxpayers.

The IRS identifies problem areas through audits, promoter investigations, whistleblower claims, data analytics, taxpayer complaints, and by reviewing marketing material.

This year, as to abusive transactions, the IRS is examining Charitable Remainder Annuity Trusts, Maltese Pension Plans, foreign captive insurance policies and monetized instalment sales; it is also looking into accounts holding cryptocurrency or other digital assets. Certain scams target High Net Worth Individuals with solicitations for digital assets transactions, syndicated conservation easements, and micro captive insurance transactions.

As to consumer scams, the IRS warns taxpayers about Covid related fraud involving stolen economic impact payments, fraudulent claims for unemployment compensation, fake charities, and phishing emails, social media posts and text messages using the IRS logo with subject lines like “Action Required”. Many of these scams target the elderly. There is also the Offer in Compromise scam, where companies make outrageous claims about how they can settle a person’s tax debt for pennies on the dollar.

This year, $80 billion has also been allocated to increase IRS funding under the Inflation Reduction Act of 2022, and $46 billion is targeted at enforcement while the remaining amount will go toward upgrading the IRS’s antiquated technology.

If you have any concerns, contact your tax advisor or get in touch.

Article written by Darlene Hart.