Abusive tax schemes and abusive tax return preparers - IRS Lead Development Center

Report suspected abusive tax promotions or preparers

The IRS warns you to look out for promoters who peddle false hopes of large tax deductions from abusive arrangements. These "deals" are generally marketed by unscrupulous promoters who make false claims about their legitimacy and charge high fees to boot. These promoters frequently devise new ways to cheat the system and market them aggressively. Some taxpayers play the audit lottery hoping they don't get noticed.

Promoters make statements relating to a tax benefit or a gross valuation overstatement that they know or should know are false or fraudulent.  They often promise to eliminate or substantially reduce your tax liability.

We rely on you to help us identify promoters of “too good to be true” tax schemes and tax preparers using improper methods to avoid paying taxes. Help us protect American taxpayers from unscrupulous individuals who promote improper and abusive tax schemes as well as tax return preparers who deliberately prepare improper returns by reporting them to us.

Examples of what to report

Many promotions are complex and involve improper flow-through entities such as trusts and limited liability companies. They disguise the true ownership of income or assets. Other schemes are less complex involving the sale of low value photograph prints or inappropriate claims for refund or credit.  Examples include:

• Abusive syndicated conservation easements
• Abusive micro-captive arrangements
• Potentially abusive use of the U.S.-Malta tax treaty
• Improper claims of business credits
• Improper monetized installment sales

For detailed information on the tax schemes listed above as well as other schemes not listed here, visit the IRS Dirty Dozen page.

How to report

If you know of one of these schemes or an abusive tax return preparer, you can complete an online referral using the Form 14242, Document Upload Tool or you can send a completed Form 14242, Report Suspected Abusive Tax Promotions or Preparers PDF, and any supporting materials to the IRS Lead Development Center (LDC).

Mail:

Internal Revenue Service
Lead Development Center MS7900
1973 N. Rulon White Blvd.
Ogden, UT 84404
Fax: 877-477-9135
 

How Your Referrals Help

The LDC within the Office of Promoter Investigations follows up on each referral and ensures cases involving abusive tax schemes and improper tax return preparation are appropriately sent for further IRS action, including sending cases to Criminal Investigation. Referrals may ultimately lead to injunctions against abusive tax promoters or preparers. Other remedies include monetary penalties, suspension or revocation of electronic filing identification numbers, criminal prosecution and referral to the Office of Professional Responsibility.  The Justice Department's Tax Division and the IRS work hard to shut down fraudulent tax return preparers and tax-fraud promoters using both civil and criminal enforcement tools. Read about recent injunctions and criminal prosecutions on the U.S. Department of Justice Tax Division’s press page.