Rev. date: 08/27/2012
Taxpayers can minimize their tax liability through legitimate investment, but they cannot invest in abusive tax shelters to minimize or eliminate their tax liability. Tax shelters reduce current tax liability by offsetting income from one source with losses or deductions from another source. An abusive tax
shelter:
- Generally offers inflated tax savings which are disproportionately greater than your actual investment placed at risk. Generally, you invest money to generate income or capital appreciation but an abusive tax shelter generates little or no income or capital
appreciation.
- Exists primarily to reduce taxes unreasonably for tax avoidance or evasion. In comparison, a legitimate investment produces income or capital appreciation and involves a risk of loss proportionate to the
investment.
- Is often marketed in terms of how much you can write off in relation to how much you invest. A series of tax laws have been designed to halt abusive tax
shelters.
There is current information on
irs.gov covering abusive tax shelters including:
- The American Jobs Creation Act of 2004 which contains many provisions that will affect abusive tax
shelters
- Notice 2009-59 which contains a list of 34 transactions which have been identified as listed transactions which are a type of tax avoidance
transaction
- Notice 2009-55 which contains a list of 4 transactions which have been identified as transactions of
interest
- The Office of Tax Shelter Analysis
Rev. date: 08/27/2012
Whether you are entitled to an additional state tax refund depends on the change that was made to your federal return. For example, if you used the wrong line on the tax tables to figure your tax on your federal tax return, this may not have an impact on your state tax return. If, however, the change was made to the amount of your taxable income, it may have an impact on your state tax
return.
Contact your state tax office for additional information. It is helpful to have a copy of your tax returns (federal and state) and a copy of the IRS notice when you call. For contact information for the tax office of the state you need to contact, please go to
our
Alphabetical State Index.
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