Income tax filing day may have come and gone, but the IRS warns taxpayers that scammers haven’t moved an inch. In fact, the agency says that in its “Dirty Dozen” list of scams, that there are four potentially abusive ones starting to creep up that it’s got its eyes on, and for the time being, the public needs to keep its eyes open, too.
The four transactions involve charitable remainder annuity trusts, foreign captive insurance, monetized installment sales, and Maltese individual retirement arrangement, a weird tax shelter that came about during the first Obama administration.
How these scams play out
The bottom line for the scams that the IRS wants the public to be aware of is all promise tax savings that are too good to be true. However, once a taxpayer falls for it, they may legally compromise themselves instead of saving on their tax obligations.
Maltese tax option: Scammers seem to love the Maltese rip-off because taxpayers are likely to be unfamiliar with it and it’s not something simple like taking a deduction for donating clothes to Goodwill. The Maltese tax option is something where a U.S. taxpayer could avoid U.S. tax by making contributions to certain foreign individual retirement arrangements in Malta (or other foreign countries).
The Wall Street Journal says that scammers work the angle that Malta plans can significantly lower U.S. taxes on the sale of high-value assets like stock, real estate, or cryptocurrency. Instead of paying a top federal rate of…
