‘Son of Boss’ Settlements Huge for IRS
Tax evaders who employed the ‘Son of Boss’ shelter have come forward to
the IRS in droves, creating about $4 billion in settlements
By Stanley H. Block
It seems that U.S. taxpayers are finally learning the lesson: The Internal
Revenue Service means business. Tax cheats, beware!
In February, the IRS launched an amnesty program for corporate executives
who evaded taxes by transferring stock options to family controlled
partnerships — a tax-evasion scheme known as “Son
of Boss.” As part of the settlement, tax evaders would avoid criminal
prosecution if they reported all income and paid 100 percent of taxes due,
plus a 10 percent penalty.
Since then, the number of people turning themselves into the IRS has been
so substantial that the government is nearing $4 billion in settlements.
“When we announced this initiative in February, we wanted to give
corporations and executives a chance to turn the page and make things
right,” said IRS Commissioner Mark W. Everson in a statement. “The vast
majority of those involved chose to come forward under the settlement’s
tough terms. The response reflects higher standards for corporate
governance and less tolerance for abusive tax transactions.”
In all, more than 1,200 taxpayers participated in this “Son of Boss”
offer. The taxes, interest and penalties collected from this group total
more than $3.7 billion.
“We are still processing a number of the more complicated elections and
expect the final tally will be near $4 billion,” Everson added.
But not everyone participated in the amnesty program. And for those
taxpayers, they could be in trouble.
According to the IRS, at least 750 people who used “Son of Boss” scheme
did not participate in the settlement offer. In fact, 19 executives known
by the IRS are believed to have underreported their income by more than
$400 million. They are currently facing audits and possible criminal
prosecution. Additionally, more than 100 “Son of Boss” cases are already
in court, with some expected to go to trial soon.
What does this mean for taxpayers, from highly compensated corporate
executives to Average Joes filing W-2s? It means to be careful, because
now more than ever, the IRS is investigating, auditing, and prosecuting.
For the past three years, Everson’s agency has shown renewed vigor in
investigating tax cheats — from negotiating agreements with credit card
companies to identify taxpayers hiding money in offshore accounts to going
after those who promote illegal tax shelters.
In fact, in June, Lynne Meredith, the 55-year-old head of the tax-fraud
group “We the People,” was sentenced to 121 months in prisons for
promoting her tax-avoidance schemes. The case was prosecuted as a direct
effect of the IRS’s strong focus on the anti-tax movement and those who
promote illegal tax shelters.
The messages are clearer than ever: If you’re dodging taxes, you’re in
trouble.
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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