Tax Fraud

Claim of Right Deduction

No income, no tax bill. This scam says that's possible. It's not. Wouldn't it be great if you could use your income itself as a deduction to essentially get to a zero earnings level? You may want to try this one, but trust me it is not legal.

Under what con artists are calling the claim of right, perpetrators of this tax dodge are claiming that a taxpayer can deduct all of his or her wages as a necessary expense for the production of income or compensation for personal services actually rendered.

It is legal to deduct expenses you encountered while doing your job and were not reimbursed for, but not your total wages. The IRS says this scam is based on a complete misinterpretation of the Internal Revenue Code and has no basis in law.

Try it, and you'll hear from an auditor and don't forget the penalties and interest you will encumber.

How to Report Suspected Tax Fraud Activity

Suspected tax fraud can be reported to the IRS using IRS Form 3949-A, Information Referral. Form 3949-A is available for download from the IRS Web site at IRS.gov, or through the U.S. Mail by calling 1-800-829-3676. The completed form or a letter detailing the alleged fraudulent activity should be addressed to the Internal Revenue Service, Fresno, CA 93888.

The mailing should include specific information about who is being reported, the activity being reported, how the activity became known, when the alleged violation took place, the amount of money involved and any other information that might be helpful in an investigation.

The person filing the report is not required to self-identify, although it is helpful to do so. The identity of the person filing the report can be kept confidential. The person may also be entitled to a reward.

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