Tax Schemes to
Watch Out For
There is a growing number of investment outlets claiming to operate as tax shelters. While it’s not illegal to have a bank account or credit card issued by an offshore institution, it is illegal to hide taxable income. The tax code specifically requires a taxpayer to report taxable income from all sources, foreign or domestic including income on foreign bank accounts.
Illegal schemes arguing that employers don’t have to withhold federal income tax or employment taxes from employees’ wages continue to surface nationwide. The IRS categorically challenges such arguments on the grounds of tax evasion. If taxes aren’t withheld regularly from paychecks, a taxpayer may ultimately face a large tax bill along with penalties and interest.
Trusts are usually a legitimate and frequently used financial planning tool, where a taxpayer’s money is controlled and managed by an independent trustee. In many cases, they do offer tax advantages, but the urge to cut taxes, combined with insufficient understanding of IRS trust requirements, often makes taxpayers a target for self-styled experts promising to reduce or eliminate taxes through illegal trust investments. Consider all the tax consequences of a trust arrangement by discussing it with us before entering into one.
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