The IRS began its “Dirty Dozen” list for 2022, which includes potentially abusive arrangements that taxpayers should avoid. The tax scams in this series focus on four transactions that are wrongfully promoted and will likely attract additional agency compliance efforts in the future. Those four abusive transactions involve charitable remainder annuity trusts, Maltese individual retirement arrangements, foreign captive insurance and monetized installment sales. These are the first four entries in this year’s Dirty Dozen series.
Taxpayers who have already claimed the purported tax benefits of one of these four transactions on a tax return should consider taking corrective steps, including filing an amended return and seeking independent advice. Where appropriate, the IRS will challenge the purported tax benefits from the transactions on this list and may assert accuracy-related penalties. Further, the IRS informed that to combat the evolving variety of these potentially abusive transactions, the IRS created the Office of Promoter Investigations (OPI). The IRS has a variety of means to find potentially abusive transactions, including examinations, promoter investigations, whistleblower claims, data analytics and reviewing marketing materials.
Further, the IRS reminded taxpayers to watch out for and avoid advertised schemes, many of which are now promoted online, that promise tax savings that are too good to be true and will likely cause taxpayers to legally compromise themselves. Additionally, the IRS informed that taxpayers who have engaged in any of these transactions or who are contemplating engaging in them should carefully review the underlying legal requirements and consult independent, competent advisors before claiming any purported tax benefits.