On April 5, 2023, the IRS announced the final entries to its annual Dirty Dozen list for 2023, sounding the alarm about various schemes and potentially abusive transactions that target taxpayers and businesses all year round, but particularly during tax season.
The list warns of swindles through electronic communication, like fake text messages (smishing) and emails (phishing) from scammers posing as legitimate organizations, including purported charities or the IRS itself. The list also includes sophisticated transactions targeted to high-income taxpayers, including Charitable Remainder Annuity Trusts and Monetized Installment Sales, and ineligible businesses claiming Employee Retention Credits (ERC) and Fuel Tax Credits.
The entries on the annual Dirty Dozen list are the subject of pending and potential enforcement action, including civil promoter and preparer investigations, civil audits, and criminal investigations and prosecutions. While many of the transactions listed are not inherently improper, such as Puerto Rico’s Act 20 and Act 22 incentives, the IRS is concerned with transactions that may cross the line from legal tax avoidance to illegal and abusive schemes. The IRS is determined to identify, investigate, and hold accountable individuals and entities engaged in this conduct, and the potential consequences can be severe. Those contacted by the IRS or Department of Justice regarding any of the items on the 2023 Dirty Dozen list should consider legal representation.
The complete 2023 Dirty Dozen can be found here.