What's New in Finances
IRS targets fraudulent trusts
The criminal investigation division of the Internal Revenue Service is targeting abusive trust schemes – both promoters of illegal trusts and taxpayers who utilize them. Both domestic trusts and foreign (offshore) trusts are used by promoters. The basic scheme is to have a series of vertically layered trusts with each trust distributing income to the next layer. The result is to illegally reduce the taxpayer’s taxable income to next to nothing.
There are many legal trusts, typically used for estate planning and charitable purposes, but fraudulent trusts are tax evasion schemes which are illegal. To find out more about the kinds of trusts considered fraudulent, visit the IRS web site at www.treas.gov/irs/ci.