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Abusive Tax Schemes and Abusive Tax

Return Preparers - IRS Lead
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Report Suspected Abusive Tax Promotions or Preparers

The IRS warns you to look out for promoters who peddle false hopes of large tax deductions from
abusive arrangements. These "deals" are generally marketed by unscrupulous promoters who make
false claims about their legitimacy and charge high fees to boot. These promoters frequently devise
new ways to cheat the system and market them aggressively. Some taxpayers play the audit lottery
hoping they don't get noticed.
Promoters make statements relating to a tax benefit or a gross valuation overstatement that they know
or should know are false or fraudulent.  They often promise to eliminate or substantially reduce your
tax liability.
We rely on you to help us identify promoters of “too good to be true” tax schemes and tax preparers
using improper methods to avoid paying taxes. Help us protect American taxpayers from unscrupulous
individuals who promote improper and abusive tax schemes as well as tax return preparers who
deliberately prepare improper returns by reporting them to us.

Examples of what to report

Many promotions are complex and involve improper flow-through entities such as trusts and limited
liability companies. They disguise the true ownership of income or assets. Other schemes are less
complex involving the sale of low value photograph prints or inappropriate claims for refund or credit. 
Examples include:
Abusive syndicated conservation easements
Abusive micro-captive arrangements
Potentially abusive use of the US-Malta tax treaty
Improper claims of business credits
Improper monetized installment sales
For detailed information on the tax schemes listed above as well as other schemes not listed here, visit
the IRS Dirty Dozen page.

How to report
If you know of one of these schemes or an abusive tax return preparer, send a completed Form 14242,
Report Suspected Abusive Tax Promotions or Preparers PDF , and any supporting materials to the IRS
Lead Development Center (LDC).
Mail:
Internal Revenue Service Lead Development Center
Stop MS5040
24000 Avila Road
Laguna Niguel, California 92677-3405
Fax: 877-477-9135

How Your Referrals Help

The LDC within the Office of Promoter Investigations follows up on each referral and ensures cases
involving abusive tax schemes and improper tax return preparation are appropriately sent for further
IRS action, including sending cases to Criminal Investigation. Referrals may ultimately lead to
injunctions against abusive tax promoters or preparers. Other remedies include monetary penalties,
suspension or revocation of electronic filing identification numbers, criminal prosecution and referral
to the Office of Professional Responsibility.  The Justice Department's Tax Division and the IRS work
hard to shut down  fraudulent tax return preparers and tax-fraud promoters using both civil and
criminal enforcement tools. Read about recent injunctions and criminal prosecutions on the U.S.
Department of Justice Tax Division’s press page .

Related Topics
Tax Scams - How to Report Them
Overview - Abusive Tax Schemes
Program to Shut Down Schemes and Scams 
Recognized Abusive and Listed Transactions

Videos
Tax Scams - Sound Too Good to be True 

Page Last Reviewed or Updated: 10-Aug-2022  Share  Print

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