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Saturday, March 21, 2009

5 Tax Scams: Do They Work?

Cheating the IRS is illegal and dumb. That said, Details asked attorney Kelly Phillips Erb—who keeps a blog that welcomes cheaters—to evaluate a few of the more popular scams. "I find their logic interesting," Erb says.

Hide Your Gambling Winnings: Doable, but a score of $1,200 at the slots or $600 at the track requires filling out a W-2G form. If you plan to deduct losses, keep a journal of the event—it will come in handy during an audit.
Make Up Dependents: Those who fabricate kids are walking a fine line, Erb warns. Suddenly having 10 dependents raises a red flag, and could trigger Patriot Bill-era charges.
Invent Donations to Charity: The IRS cross-references your donations against a list of charities, so forget about it—unless it's a donation to Goodwill for less than $500.
The Old "Home Office": Just don't deduct 100% of anything, especially the phone line.
Don't Pay At All: Ask Wesley Snipes. "Yeah, a lot of those people end up in jail," says Erb

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