If your business is profitable and your tax preparer is claiming that he or she can permanently eliminate all current or future tax liability, be wary.

It’s true that a good tax preparer has a forward thinking mentality with the objective of avoiding taxes where possible.

Good preparers take the time to learn their client’s long term goals and with that knowledge structure tax strategies that minimize income tax exposure.

Buts let’s face it, if your business is profitable, you will pay income taxes at some point. Any tax advisor who is telling you that he or she can eliminate your tax liability or that you will never pay income taxes is most likely promoting an illegal tax evasion scheme.

Here are some recent examples of illegal activity:

Nevada Federal Court Permanently Bars Las Vegas Man From Promoting Sham-Trust Scheme
A tax scheme promoted in California and other states resulted in an injunction order requiring the promoter to give the government a list of the names, addresses, and Social Security numbers of customers for whom he prepared income tax documents over the past ten years.

Justice Department Sues To Shut Down San Diego-Area Tax Preparation Firm
IRS Estimates that National City Tax Preparation Firm Cost Government $18 million

Department of Justice News Release on Suit against Five Jackson Hewitt OutletsApril 3, 2007 — The U.S. Government Sues Jackson Hewitt Tax Preparation Franchises in Four States, Alleging Pervasive Fraud.

Fraudulent Telephone Tax Refunds, Abusive Roth IRAs Top Off 2007 “Dirty Dozen” Tax ScamsIR-2007-37, Feb. 20, 2007 –– Also new to the “Dirty Dozen” are abuses involving the American Indian Employment Credit, domestic shell companies and structured entities.

Tax Return Preparer FraudFS-2007-12, January 2007 — Taxpayers should use caution when engaging professional tax return preparers and learn the warning signs of potential fraud.