The Internal Revenue Service has issued a warning to taxpayers regarding tax avoidance schemes as this year's tax season starts to wrap up.
The IRS warned that these types of schemes can come in different forms, such as syndicated conservation easements or micro-captive insurance arrangements. The schemes can also be international and involve hiding money and digital assets outside of the United States by using Maltese foreign individual retirement accounts or foreign captive insurance, according to the IRS.
A micro-captive insurance arrangement, one of these schemes that taxpayers should be aware of, is an insurance company whose owners elect to be taxed solely on the captive's investment income. These types of scams include implausible risks, a failure to match actual business needs, and often involve unnecessary duplication of a taxpayer's commercial coverages.
The IRS also warned about Maltese individual retirement arrangements, in which United States residents try to avoid U.S. taxes by contributing to foreign individual retirement arrangements either in Malta or other host countries. Participants in these schemes improperly claim an exemption from U.S. income tax using treaty provisions the U.S. has with the host county to make contributions in a form"other than cash.
Taxpayers who wish to report a tax scheme can mail or fax a completed Form 14242, along with any supporting materials, to the IRS Lead Development Center in the Office of Promoter Investigations.This warning from the IRS marks the end to their Dirty Dozen series, in which they warned taxpayers of various scams to be wary of amid tax season.
Additional information regarding scams that taxpayers should be on the alert for can be found on the IRS's website.
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