Each year, the IRS publishes a list of a dozen tax scams to lookout for — and this year, abusive retirement plans made the cut.

The IRS works with the Justice Department to pursue and shutdown perpetrators of these and other illegal scams. Promotersfrequently end up facing heavy fines and imprisonment. Meanwhile,taxpayers who wittingly or unwittingly get involved with theseschemes must repay all taxes due plus interest and penalties.

“The dirty dozen represents the worst of the worst tax scams,”IRS Commissioner Doug Shulman said in a press release. “Don’t fallprey to these tax scams. They may look tempting, but thesefraudulent deals end up hurting people who participate inthem.”

When it comes to abusive retirement plans, the IRS is lookingfor transactions that taxpayers use to avoid the limits oncontributions to IRAs, as well as transactions that are not properly reported asearly distributions. Advisors are warned against encouragingtaxpayers to shift appreciated assets at less than fair marketvalue into IRAs or companies owned by their IRAs to circumventannual contribution limits. Other variations have included the useof limited liability companies to engage in activity that isconsidered prohibited.

Of additional concern to retirees are nontaxable social securityreturns with exaggerated withholding credit. This tactic results inno income reported to the IRS on the tax return. Often both thewithholding amount and the reported income are incorrect. Taxpayersshould avoid making these mistakes. Filings of this type of returnmay result in a $5,000 penalty.

The other 10 scams include:

• Hidden income offshore
• Identity theft and phishing
• Return preparer fraud
• Filing false or misleading forms
• Frivolous arguments
• Abuse of charitable organizations and deductions
• Disguised corporate ownership
• Zero wages
• Misuse of trusts
• Fuel tax credit scams

Advisors can be invaluable in helping their clients navigatetax laws. But by leading clients into a scam, advisors hurtclients and themselves.