For as much as the IRS may elicit marginal feelings of good-will by the American public, especially during the height of tax filing season, tax cheats and their conspirators warrant down right ill-will by their taxpaying counterparts.
Perhaps no one deserves the ire of taxpaying Americans more than the tax cheats who may be sheltering as much as $3 trillion in assets in offshore bank accounts. One estimate says the U.S. Treasury loses $300 billion a year in taxes through phony trusts, fake charity or religious arrangements and offshore bank accounts.
No matter your economic station in life, no one deserves to carry a heavier tax load because someone else is gaming the system. And yet, hard-working families across America who pinch pennies, struggle to make ends meet and pay their fair share of taxes are left to foot the bill for the billions of dollars unpaid by tax evaders.
Tax scams are as old as the tax code. But the Internet is breathing new life into tax 'e-vasion.' Even well-intentioned taxpayers are falling victim to a proliferation of scams blanketing Internet websites and flooding in-boxes around the world. The American people should be aware of the snake oil these hucksters are selling. They're bottling old poison and launching it into cyberspace.
As chairman of the Senate Finance Committee, which bears oversight authority over the IRS, I held in April a congressional hearing to examine the extent of the problem, expose common schemes and educate consumers on ways to identify this type of fraud. Experts at my hearing testified that hundreds of thousands of Americans are participating in or considering participating in Internet-based or -augmented tax scams.
Prior to the Internet, tax con artists relied on labor-intensive seminars, phone pitches and videotape sales to reel in takers. Now the conspirators send unsolicited bulk e-mail or operate sophisticated web sites that anyone with a mouse and a modem can reach.
Sophisticated sales pitches often mask the sleek scams for what they are: illegal. One witness told how he responded to an unsolicited bulk e-mail message for a business opportunity and ended up in an anti-tax pyramid scheme, losing $8,000. Others described some of the tax evasion techniques cropping up on-line, including tax-exempt trusts and business structures; off-shore accounts, banks, businesses and trusts; 'dropping out' of the tax system by stopping payment; and charity-like or religious entities established for personal tax avoidance.
It may seem to some the Internal Revenue Service can never do right by lawmakers who oversee the agency. Either it audits too few, or not enough taxpayers. Either it should channel more resources to taxpayer services, or focus on compliance and enforcement. However, American taxpayers can thank rigorous congressional oversight for keeping the agency on its toes. The scrutiny makes the IRS more effective and accountable.
In this instance, I am urging the IRS to take a more active role in policing the proliferation of on-line offers for tax avoidance. For one thing, the IRS should focus its enforcement resources on con artists, not lawful taxpayers. The longer con artists are left to lure taxpayers into their trap, the greater the losses to the Treasury and the more likely innocent taxpayers will be harmed. Remember, taxpayers can be liable for penalties applicable to any underpaid taxes on top of the taxes owed.
Consumers should stick by a tried and true principle. Don’t be tempted by offers that sound too good to be true. If someone promises to find you a free tax ride, you’re better off telling them to take a hike.
Watch out for sales pitches like: 'If this were illegal, don't you think the government would arrest me;' 'Taxes are unconstitutional. The 16th Amendment was never ratified;' 'Taxes have to be paid only by U.S. citizens;' 'Rich people save money on their taxes with this plan; so can you;' 'The IRS is weak; play the audit lottery.'
Check with the IRS. The agency has excellent information about potential tax scams on its criminal investigation web site, http://www.treas.gov/irs/ci. In addition, the IRS has a hotline to report suspected tax fraud activity at 1-800-829-0433.