The IRS today announced the conclusion of its annual list of the “Dirty Dozen” tax scams.  The list is published each year by the IRS as a way to both inform and warn taxpayers about the most common tax schemes they may encounter especially during filing season.  

This year’s list remains unchanged from last year’s list with familiar tactics such as “Offshore Tax Avoidance,” “Falsely Padding Dedudutions,” and  “Abusive Tax Shelters,” appearing yet again.

With respect to Offshore Tax Avoidance, the IRS noted that numerous individuals have been identified as evading U.S. taxes by hiding income in offshore banks, brokerage accounts, nominee entities, foreign trusts, employee leasing schemes, private annuities, or insurance plans.  The IRS’s release concerning Offshore Tax Avoidance said:

The IRS uses information gained from its investigations to pursue taxpayers with undeclared accounts, as well as bankers and others suspected of helping clients hide their assets overseas.

Commissioner John Koskinen mentioned that the IRS has collected $10 billion in back taxes in recent years. He cited the offshore voluntary disclosure programs and third-party reporting as reasons why it is less likely that offshore financial accounts will go unnoticed by the IRS. 

The IRS’s release on Falsely Padding Deductions focused on warning taxpayers against “the temptation to falsely inflate deductions or expenses. . .”  Some taxpayers are not able to avoid that temptation and they file tax returns with substantially inflated business expenses, costs of goods sold, and in some cases they simply make-up expenses or deductions in an effort to pay less tax or increase their tax refund.  

Finally, the IRS warned of Abusive Tax Shelters for the third year in a row.  More specifically, “micro-captive insurance tax shelters.”  Promoters, accountants, or wealth planners persuade owners of closely held entities to participate in schemes that lack attributes of genuine insurance.  According to the IRS release, “coverages may insure implausible risks, fail to match genuine business needs or duplicate the taxpayer’s commercial coverages.  Premium amounts may be unsupported by underwritring and actuarial analyiss, may be geared toward a desired deduction amount or may be significantly higher than premiums for comparable commercial coverage.” In November of 2016, the IRS released Notice 2016-66 which advised that micro-captive insurance transactions have the potential for tax avoidance or even evasion.

The unscrupulous promoters of these abusive transactions always find new products to promote as the IRS and the Courts crack down on the abuse.  Accordingly, we expect the IRS to continue to pursue the promotors of the latest trends in tax evasion and we expect Abusive Tax Shelters to continue to appear on the Dirty Dozen List.  

If you have knowledge of offshore tax avoidance, substantially infalted tax deductions, or abusive tax structures, contact the tax attorneys at The Ferraro Law Firm to discuss filing a claim for an award for providing the information to the IRS and doing your part to hold tax evaders accountable. 



  • Linda Williams

    How many times have IRS Whistleblowers heard this same old same old about the IRS Whistleblower Program from nominees over the last 10 years……….

    For most of us it really is just Groundhog Day x 10

    Senator Grassley has faded pretty badly the last 2-3 years and effectively given up.

    The bi-partisan legislative amendments to the Whistleblower Program that were announced last April are still not passed by Congress.

    Meanwhile, only some 27 odd 7623(b) payments over 10 years 30,000+ cases still in limbo and thousands of IRS Whistleblower appeal cases from the cull of the last 2 years trapped in a Federal Tax Court that is frankly overwhelmed and can’t cope.

    Can anybody tell me how this god forsaken and broken program has improved over the last 10 years!!!!!!!!

  • Linda Williams

    If there’s anyone left out there in IRS Whistleblower land,

    Can we agree that the 7623(b) IRS Whistleblower Program officially died on its 10th anniversary, the December 21, 2016.

    Credit to the IRS they withstood the criticism but knew how to play the long game and neutralise the program.

    Are there any of the original IRS Whistleblowers from 2008, 2009, 2010, 2011 still left standing?

    Afficanando, Uncle Sams Helper, Bubba Shawn etc etc

  • So far this year we have received several million dollars of awards for clients whom we had submitted claims back then, but they have not been vocal on this blog and we did not do any press releases on them. Many other clients of ours who have been paid millions of dollars over the last few years also chose to remain anonymous. So yes, there are still cases from that period standing (some of those paid clients have received partial awards and thus their claims remain open for future payments), but for sure we would agree that the cases take longer than even we expected.