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IRS Identifies 12 Notorious Tax Scams

The IRS recently designated the "dirty dozen" tax scams for 2007. This annual list, which covers blatant rip-offs by taxpayers, features the following additions:

*Telephone tax refunds: Many taxpayers have requested inappropriate amounts for the special credit on their 2006 returns.

*Abusive Roth IRAs: Undervalued property is transferred to a Roth IRA in an attempt to avoid the annual contribution cap. Then no tax is due when the property is liquidated and distributions are made.

*Disguised corporate ownership: Domestic "shell" corporations are being established for tax evasion purposes.

*Native American credit: This limited credit for employers is being claimed by some individual taxpayers.

*Structured entity credit: In this illegal scheme, promoters set up partnerships to buy and sell various tax credits. The alleged credits are the only assets owned by the partnership. Once the credits are exhausted, the investors deduct losses.

Other scams making a return appearance on the dirty dozen list are "phishing" to facilitate identity theft; zero wages; return preparer fraud; trust misuse; abuse of charitable organizations and

deductions; Form 843 tax abatements; and frivolous arguments. Forewarned is forearmed.

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