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tax shelter

Investments that yield tax benefits are sometimes called tax shelters and can be legal under federal and state laws. But abusive tax shelters are schemes involving transactions with little or no substance that are not recognized by federal and state taxing authorities and that may create taxpayer liability for interest, penalties, and possible criminal prosecution.

In Washington State, as in other states, certain investments that offer tax benefits are legally recognized as tax shelters. These can include investments in retirement accounts, real estate, and municipal bonds, among others, which are designed to encourage specific economic activities and provide legitimate ways to reduce tax liabilities. However, abusive tax shelters are illegal. These are typically complex financial arrangements with no real economic purpose other than to evade taxes. The Internal Revenue Service (IRS) and Washington State's Department of Revenue do not recognize abusive tax shelters and actively pursue taxpayers who engage in such schemes. Participants in abusive tax shelters can face substantial penalties, interest on unpaid taxes, and even criminal charges. It's important for taxpayers to ensure that any tax shelter they consider is legitimate and complies with both federal and state tax laws.

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Taxes

tax shelter

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Washington State Code

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Taxes

tax shelter

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