IRS Sharpens Rules, Fine Tunes Agency Operations
At the same time the Internal Revenue Service sharpens its rules to take
on tax cheats, the agency reorganizes its operations in order to increase
front-line soldiers.
By Stanley H. Block
The War on Terror isn’t the
only conflict the United States government is fighting. Every day, agents
with the Internal Revenue Service are fighting the War on Tax Cheats.
The stakes are enormous.
According to an October report by the General Accounting Office, the
United States government has lost about $33 billion in taxes from the use
of offshore shelters from 1993 to the present.
“Abusive shelters are complex
transactions that manipulate many parts of the tax code or regulations and
are typically buried among ‘legitimate’ transactions reported on tax
returns,” the GAO wrote in its report. “Because these transactions are
often composed of many pieces located in several parts of a complex tax
return, they are essentially hidden from plain sight, which contributes to
the difficulty of determining the scope of the abusive shelter problem.”
Each year, the amount of tax
loss due to abusive shelters continues to increase. In 1993, the U.S.
government may have lost as much as $12.1 billion in taxes, according to
the report. In 1999, that amount increased to as much as $18.4 billion.
That’s why the IRS took
actions last month to put a stop to these abusive tax shelters. Recent
rules announced by the agency clarify the type of transactions that must
be reported and stiffen penalties for continuing to conceal money in
illegal trust schemes.
But the agency’s actions
didn’t stop there. In January, the IRS announced plans to overhaul the
entire agency in order to maximize the number of front-line positions —
the people who go out and investigate those taxpayers who are illegally
concealing income offshore.
The moves are intended to
consolidate backroom operations in order to give the agency more
flexibility in these times of increasing tax loss due to illegally
operated shelters, according to IRS Commissioner Mark W. Everson.
“These changes reflect our
ongoing effort to manage the agency efficiently and effectively for the
nation’s taxpayers,” Everson said. “By tightening operations, we can
devote more people to front-line positions and strengthen tax enforcement
activities. At the same time, service to taxpayers will not be reduced.”
The reorganization doesn’t
come as a surprise. Last year, Congress emphasized to the IRS that it
wanted to clamp down on tax shelters and gave the agency $2.2 trillion to
increase investigations of wealthy taxpayers. Although the vast majority
America’s 130 million taxpayers follow the law, a small minority creates
enormous tax loss for the entire nation. Those are the people the IRS is
planning to hunt down.
If you are one of the
taxpayers who have hidden income from the government between 1993 and
today, it’s time to confess. Agents are gunning for you.
Stanley H. Block is a Maryland State Tax
Attorney and a member of the American Society of IRS Problem Solvers. You
can contact him at 410-727-6006 to obtain a free subscription to his newsletter
titled The IRS Times & Inquirer.
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