Exempt Organizations Advisory - IRS Publishes Annual List of Tax Scams

On February 20, the IRS issued its annual "Dirty Dozen," a report of tax schemes, involvement in which can lead to significant penalties, interest and possible criminal prosecution. The 2007 reporting includes the following item related to tax-exempt organizations:

"Abuse of Charitable Organizations and Deductions: The IRS continues to observe the use of tax-exempt organizations to improperly shield income or assets from taxation. This can occur when a taxpayer moves assets or income to a tax-exempt supporting organization or donor-advised fund but maintains control over the assets or income. Contributions of non-cash assets continue to be an area of abuse, especially with regard to overvaluation of contributed property. In addition, the IRS is noticing the return of private tuition payments being disguised as charitable contributions to religious organizations."

Abusive credit counseling agencies, which were included in last year’s list, dropped off the list in 2007, but the IRS warns that "the absence of a particular scheme from the Dirty Dozen should not be taken as an indication that the IRS is unaware of it or not taking steps to counter it."

For a complete list of the 2007 "Dirty Dozen," click http://www.irs.gov/newsroom/article/0,,id=167983,00.html.