The Internal Revenue Service has announced the first installment of its annual “Dirty Dozen” list of tax scams. Published every year, the “Dirty Dozen” comprises the twelve most prevalent tax scams that taxpayers may encounter, and is a strong indicator of where the IRS will concentrate its enforcement resources. The first four entries on the “Dirty Dozen” are potentially abusive arrangements involving charitable remainder annuity trusts, Maltese individual retirement arrangements, foreign captive insurance, and monetized installment sales. In the coming days, the IRS will announce the eight additional tax scams that round out the “Dirty Dozen” for 2022.
In a press release, IRS Commissioner Chuck Rettig warned that “[t]axpayers should stop and think twice before including these questionable arrangements on their tax returns. Taxpayers are legally responsible for what’s on their return, not a promoter making promises and charging high fees. Taxpayers can help stop these arrangements by relying on reputable tax professionals they know they can trust.”
The first four scams on the “Dirty Dozen” list are described by the IRS as follows:
Use of Charitable Remainder Annuity Trust (CRAT) to Eliminate Taxable Gain. In this transaction, appreciated property is transferred to a CRAT. Taxpayers improperly claim the transfer of the appreciated assets to the CRAT gives those assets a step-up in basis to fair market value as if they…
