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Avoid Falling Victim to Abusive Tax Schemes #3: Abusive Home-Based Business Tax Scams

September 2nd

The IRS is presently involved in extensive efforts to curb abusive tax shelter schemes and promotions. Home-based business schemes are considered abusive because they manipulate and misinterpret tax laws.

Home-based business scams generally operate by asserting that taxpayers can deduct most, or all, of their personal expenses as business expenses. Specifically, tax scams often involve the creation of fake home-based businesses or the appearance of such a business where none actually exists, followed by the erroneous deduction of individual or family expenses on federal tax returns.

Other schemes have been known to utilize a legitimate home-based business. In these cases, taxpayers might have a legitimate business, but they then either inflate their business expenses or falsely attempt to deduct personal living expenses.

Home-based business scams have gained significant popularity lately through promoters who sell them as a means of reducing taxes. Promoters typically market a package or other materials, claiming to show taxpayers how they can avoid paying income taxes. However, these claims are always false and such schemes are always illegal.

Penalties and Criminal Prosecution

The IRS is currently aggressively pursuing the successful prosecution of those who participate in such schemes, especially those who promote them. This includes the investigation of home-based business schemes.

Participation in home-based business schemes can result in IRS penalties, including the repayment of taxes owed with interest and fines. Other punishments could also include criminal prosecution and imprisonment. It is important to note that even innocent taxpayers involved in these schemes can face staggering amounts of back taxes and penalties.

Taxpayers involved in any of these scams should be certain to correct any incorrectly filed tax returns as soon as possible.


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