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Beware the New Tax Shelter Rules

Tax shelters come under increased scrutiny.

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This story appears in the October 2005 issue of Entrepreneur. Subscribe »

Entrepreneurs should be wary of the new tax shelter- reporting requirements lurking in the American Jobs Creation Act of 2004. Proliferation of abusive shelters led Congress to strengthen the law by imposing stiff penalties for taxpayers who fail to follow the rules or who incorrectly report shelter activities.

Under the new rules, taxpayers must file an annual informational return (IRS Form 8886), which discloses each reportable transaction or tax shelter they are involved in. The form must be attached to your annual income tax return, and a copy must be filed with the Office of Tax Shelter Analysis in the first year you invest.

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