Illegitimate Trusts

Does transferring your money into a trust to avoid paying federal income tax sound like a great idea? Many people do, but it’s illegal and you will get caught if you attempt it.

Over the past few years, people promoting abusive tax avoidance schemes have turned their attention to getting taxpayers to transfer their assets into trusts. The benefits advertised by these con artist promoters include: taxable income reductions, deductions for personal expenses paid by the trust and decreases in estate or gift taxes. However, if the trust being offered is abusive, you’ll never see the advertised tax benefits.

Image Illegitimate Trust Tax Scams

The IRS is aware of this scam

The IRS is on to these illegal methods of evading the payment of federal taxes. Trusts are scrutinized heavily. Injunctions have been placed by the IRS against known promoters of these illegal trust programs. And several of these promoters, along with their customers, have been prosecuted in federal criminal courts.

There are genuine trusts that people use as a lawful planning tool for their finances. And they can provide some tax advantages. However, sometimes phony trusts can appear indistinguishable from legitimate trusts. Prior to entering into any agreements for using a trust, we recommend running the offered trust by an experienced tax professional you trust.

How to Report Suspected Tax Fraud Activity

The following information on how to report suspected tax fraud comes directly from the IRS website (www.irs.gov):

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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