by Caitlin O’Donnell

Though scammers are prevalent throughout the year, this is especially true during tax season. The IRS releases a list of the most common scams each year after tax season. In 2022, the list focused primarily on tax avoidance strategies.

  1. Hiding assets and under-reporting digital assets
    Many think they can place their earnings in an offshore account to avoid paying taxes. However, U.S. citizens are taxed on worldwide income. Similarly, some people place assets and accounts under other people’s names to evade taxes. It is a myth that digital assets, like cryptocurrency, are either not taxed or are difficult for the government to trace.
  2. Not filing tax returns
    While most Americans file and pay their taxes on time, many high-earning individuals do not file. Many do not know that the fines for failing to file are higher than those for failing to pay.
    Therefore, those worried about being able to afford their taxes are better off filing and setting up a payment plan. The IRS charges 0.5% of total unpaid taxes each month a person is late on filing. However, the IRS only charges 0.5% every month a person is late paying taxes. If the IRS believes a person is fraudulently refusing to file, the penalty increases to 15% per month.
  3. Abusive Syndicated Conservation Easements
    Conservation Easements give landowners a tax break when they waive the right to develop their land and allow a nonprofit land trust to use it instead. Many wealthy people appraise this land for significantly more than it is worth or enter into a partnership without intending to do business with the nonprofit. They just collect the tax break.
  4. Abusive Micro-Captive Insurance Arrangements
    These schemes focus on insurance. It can be as simple as illegally overcharging the customer. Policies may cover only implausible incidents or not meet the business’ needs.