The Internal Revenue Service unveiled its annual listing of tax scams Monday that it labeled the "Dirty Dozen."

The 2004 list includes several new tricks that either manipulate laws governing charitable groups, abuse credit counseling services, or rely on refuted arguments to claim tax exemptions, according to the IRS.

"The Dirty Dozen is a reminder that tax scams can take many forms," said Mark W. Everson, IRS commissioner. "Don't be fooled by false promises peddled by scam artists. They'll take your money and leave you with a hefty tax bill."

The IRS Dirty Dozen List

Trust Misuse: For years, promoters have urged taxpayers to transfer assets into trusts. The promoters promise reduction of taxable income, and added deductions for personal expenses and reduced estate or gift taxes. However, some trusts do not deliver the promised tax benefits, and the IRS said it is looking into these arrangements. More than two dozen injunctions have been obtained against promoters since 2001, and numerous promoters and their clients have been prosecuted, the IRS said.

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Frivolous Arguments: According to the IRS, promoters have been known to make the following outlandish claims: that the 16th Amendment concerning congressional power to lay and collect income taxes was never ratified; that wages are not income; that filing a return and paying taxes are merely voluntary; and that being required to file Form 1040 violates the Fifth Amendment right against self-incrimination or the Fourth Amendment right to privacy.

"Don't believe these or other similar claims," said Everson. "Such arguments have been thrown out of court."

Tax Return Preparer Fraud: . Dishonest tax return preparers can cause many headaches for taxpayers who fall victim to them, according to the IRS. Such preparers may skim a portion of their clients' refunds and charge inflated fees for tax return preparation services, according to Everson.

Credit Counseling Agencies. The IRS warned that taxpayers should be careful with credit counseling organizations that claim they can fix credit ratings, push debt payment agreements or charge high fees or other contributions that can add to the creditor's debt. The IRS Tax Exempt and Government Entities Division has found that some of these tax-exempt organizations are charging debtors large feels while provided little or no counseling.

"Claim of Right" Doctrine: The IRS said that in this scheme, a taxpayer files a return and attempts to take a deduction equal to the entire amount of his or her wages.

"This so-called deduction is based on a misinterpretation of the Internal Revenue Code and has no basis in law," said Everson.

In a similar scheme, filers attempt to eliminate their entire adjusted gross income by deducting it on Schedule A, according to the IRS, in an attempt to show that no gain was realized.

Corporation Sole: Since the fall of 2004, The Department of Justice has obtained six injunctions against promoters of this system and filed complaints against 11 others. According to the IRS, participants apply for incorporation under the pretext of being a "bishop" or "overseer" of a one-person religious organization or society, hoping to show they are exempt from federal income taxes as a nonprofit, religious organization. Taxpayers are sometimes charged fees of up to $1,000 to learn the method that supporters claim lets them escape paying federal income taxes, the IRS said.

Identity Theft: The IRS said that it is aware of several identity theft scams involving taxes. In one case, customers were sent fictitious correspondence and IRS forms in an attempt to trick them into disclosing their personal financial data.

"Sometimes scammers pose as the IRS itself," said Everson. "Last year the IRS shut down a scheme in which perpetrators used e-mail to announce to unsuspecting taxpayers that they were 'under audit' and could set matters right by divulging sensitive financial information on an official-looking Web site.

The IRS does not use e-mail to contact taxpayers about issues related to their accounts. Anyone with any doubt about whether a contact from the IRS is authentic can call (800) 829-1040 to confirm it.

Abuse of Charitable Organizations and Deductions: The IRS said it has observed an increase in the use of tax-exempt organizations to shield income or assets from taxation.

Offshore Transactions: Government investigators have cracked down on individuals who try hide income in offshore bank and brokerage accounts or use offshore credit cards, wire transfers, foreign trusts, employee leasing schemes, private annuities or life insurance to do so.

Zero Return: Taxpayers are instructed to enter all zeros on their federal income tax filings by promoters of this scheme, but they report their withholding.

Employment Tax Evasion: The IRS said it has seen a number of schemes that instruct employers not to withhold federal income tax or other employment taxes from wages paid to their employees.

"Such advice is based on an incorrect interpretation of Section 861 and other parts of the tax law and has been refuted in court," said Everson. "Recent cases have resulted in criminal convictions, and the courts have issued injunctions against more than a dozen persons ordering them to stop promoting the scheme."

Employers may not be aware that they can also be held responsible for back payments of employment taxes, plus penalties and interest, the IRS said.

Involvement with tax schemes can lead to imprisonment and fines, the IRS warned. The agency said that it routinely pursues and shuts down promoters of these scams. But taxpayers should also remember that anyone pulled into these schemes can face repayment of taxes plus interest and penalties.

Anyone who suspects tax fraud is asked to report it to the IRS at (800) 829-0433.

For more information and resources to help taxpayers avoid tax scams, visit www.irs.gov. For fraud alerts, visit the IRS Fraud Alerts Web page.

"The Truth About Frivolous Tax Arguments" is an IRS Web document that outlines numerous U.S. court cases in which frivolous arguments have been rejected.

Finally, if you've always wondered why you have to pay income taxes, the IRS has the answer.