April 2017 | Business View Magazine

2 3 L From the Editor Last month,BusinessViewMagazine reported on several common taxscams that the IRS says individuals and companies should lookout for. Thismonth,we’re going to explore some of the illegal taxevasion schemes employed bythose verysame people and businesses who are out to cheat the U.S.Treasuryof an estimated $458 billion everyyear.Remember: while tax“avoidance” employs legal means to lower one’s taxbill,tax “evasion”is a crime. If a personwillfullycommits the act of taxevasion, hemayface felonycharges.Taxevasion penalties include imprisonment of up to five years,and fines as high as $250,000.The defendant mayalso be ordered to payfor the costs of prosecution.Other taxevasion penalties include communityservice, probation,and restitution depending on the cir- cumstances of the case.Taxevasion penalties can be harsh,depending on the severityof the crime. Here are some common taxevasion techniques you’d be better off to avoid: HidingorTransferringAssets or Income- This type of fraud can take a varietyof forms,from simple concealment of funds in a bankaccount to improper allocations between taxpayers.For example,improperlyallocating income to a relat- ed taxpayer who is in a lower taxbracket,such as where a corporationmakes distributions to the controlling shareholder’s children,is likelyto be considered tax fraud. FalselyPaddingDeductions- Taxpayers should think twice before overstating deductions such as charitable contributions,padding business expenses,or including credits that theyare not entitled to receive. Falsifying Income- This scam involves inflating or including income on a tax return that was never earned,either as wages or self-employment income,usuallytomaximize refundable credits. Unscrupulous people do this to secure larger refundable credits such as the Earned IncomeTax Credit and it can have serious repercussions. ExcessiveClaims for CertainBusinessCredits– For example,the fuel taxcredit is generallylimited to off-highwaybusiness use or use in farming. Consequently,the credit is not available tomost taxpayers.Still,the IRS routinelyfinds unscrupu- lous preparers who have enticed sizable groups of taxpayers to erroneouslyclaim the credit to inflate their refunds.Fraud involving the fuel taxcredit is considered a frivolous taxclaimand can result in a penaltyof $5,000. Hiding IncomeOffshore- Over the years,nu- merous individuals have evadedU.S.taxes by attempting to hide income in offshore banks,bro- kerage accounts,or nominee entities.Theyaccess the funds using debit cards,credit cards,or wire transfers.Others have employed foreign trusts, employee-leasing schemes,private annuities,or insurance plans for the same purpose.While there are legitimate reasons for maintaining financial accounts abroad,there are reporting requirements that need to be fulfilled.U.S.taxpayers whomain- tain such accounts andwho do not complywith reporting requirements risk significant fines and the possibilityof prosecution. Engaging in a ShamTransaction- You can’t reduce or avoid income tax liabilitysimplybylabeling a transaction as something it is not.For example, if payments bya corporation to its stockholders are,in fact,dividends,calling them“interest”or otherwise attempting to disguise the payments as interest will not entitle the corporation to an inter- est deduction.It is the substance,not the form,of the transaction that determines its taxability. Not Paying EmploymentTaxes- Employers are re- quired towithhold half of the Social Securityand Medicare taxes from their employees’paychecks and paythe other half out of their own pockets. Themoneyis supposed to be sent to the IRS or an authorized financial institution,usuallymonthlyor semi-weekly.Employment taxevasion schemes can takemanyforms.The IRS says that some of themore common include pyramiding,misclassi- fyingworkers as independent contractors,paying employees in cash,filing false payroll tax returns, or failing to file payroll tax returns. For more information on illegal taxscams and tax evasion schemes,you can access the IRS’s annual “DirtyDozen”list at https://www.irs.gov/uac/news- room/dirty-dozen. Al Krulick Editor-in-Chief Editor-in-Chief Al Krulick Associate Editor Lorie Steiner Vice President of Business Development Erin O’Donoghue Director of Advertising Lauren Blackwell Research Directors Paul Payne Rohan Stewart Brendan McElroy Creative Director Dana Long Vice President of Production Aimy McGrew Vice President of Publishing Andre Barefield CGO Alexander Wynne-Jones COO Brian Andersen Executive Publisher / CEO Marcus VandenBrink USA Canada Caribbean Oceania Email for all inquiries: info@businessviewmagazine.com www.BusinessViewMagazine.com 12559 New Brittany Blvd Fort Myers, 33907 239.220.5554 Contact us Continuously improving is at the core of BrandPoint Services’ DNA. Every job is surveyed and reviewed as part of our quality-control process, ensuring that we delivered on our promise. But we don’t stop there. 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