by Brian Mahany
Thanks to our friends at Offshore Alert, we just read of a new tax scam involving offshore charities. Apparently folks in the U.K. have discovered that its easy to simply create a bogus charity in another country. Once approved, the taxpayer then “donates” to the charity and takes the deduction on his or her tax return.
While donating to charity is a wonderful thing to do, the scam charities have no serious charitable purpose. Instead they are used to fund the taxpayer’s own business activities or leisure pursuits. According to an article in the Financial Times, British revenue officials uncovered one “charity” that was running a fundraising function. That function, however, was simply a personal party.
Think about it, get a large charitable deduction for purchasing food and wine for a huge house party.
The scam is remarkably simple in its design. Of course, engaging in such conduct is a crime punishable by jail. If the charity is offshore, however, how likely are the participants to be caught?
We certainly don’t advocate such criminal behavior. Because taxes are so high and seem to be increasing, more and more people are resorting to deceit and trickery to fool the IRS. Is the tax scam a problem in the U.S.? There has always been some abuse of not-for-profits domestically but we have not seen any cases first hand. Some enterprising person, however, has read the Financial Times article and is probably creating a new charity to take underprivileged kids to Hawaii.
If you or an organization you are associated with is being audited, give us a call. We have helped many people and businesses under audit. We can assist with audit defense, IRS appeals and even U.S. Tax Court. While every case is different, we were recently able to reduce a $4 million dollar audit assessment to under $100,000.
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