1,500 Taxpayers Respond to Tax Shelter Settlement
After the IRS offered not to pursue criminal charges for those taxpayers
who come forward after having participated in the “Son of Boss” tax
shelter, more than 1,500 filed paperwork with the federal government — a
strong response by any measure, according to the IRS
By Stanley H. Block
The Internal Revenue Service
is steadily building back a reputation for being doggedly tough on tax
cheats.
On May 5, the IRS offered
taxpayers who were participating in the illegal “Son of Boss” tax shelter
to come forward and avoid criminal penalties if they agreed to pay 100
percent of the tax loss caused by the shelter.
More than 1,500 taxpayers
came forward, realizing that paying back tax debt was a better option than
penalties as high as 40 percent.
“Son of Boss” schemes were
marketed in the late 1990s and 2000 to companies and wealthy individuals
by a network of law firms, accounting firms and investment banks. They
were declared illegal in 2000.
“By any measure, this is a
strong response from taxpayers entangled in Son of Boss transactions,”
said IRS Commissioner Mark W. Everson in a statement. “Those who elected
to settle did the right thing. We have already begun to contact the
taxpayers who didn’t take us up on the offer and expect to begin
enforcement action soon. ”
According to the IRS, “Son of
Boss” tax shelters have resulted in $6 billion in underreported income.
The May settlement offer was one in a number of actions over the past 18
months that the IRS has taken to curb tax shelters, believed to cost of
billions of dollars in loss every year.
Taxpayers not participating
in the settlement will soon receive letters that will assess the maximum
applicable penalties, up to 40 percent. Additionally, the IRS will
continues to identify new “Son of Boss” and other abusive transaction and
participants through investor lists obtained in IRS promoter
investigations and successful summons enforcement actions by the
Department of Justice.
This year, the IRS has
discovered at least 500 previously undisclosed “Son of Boss” transactions.
Additionally, of the 1,500 taxpayers who came forward, 85 percent had
already been identified by the IRS — signaling that the agency is becoming
more adept at identifying tax cheats.
“We will vigorously pursue
all those who participated in Son of Boss deals but did not take advantage
of the settlement initiative,” Everson said.
For those taxpayers who chose
to settle, they must sign formal settlement documents and pay their
previously unclaimed tax debts, plus interest and penalties.
“For those who haven’t come
forward and intend to take the IRS to court, we plan an aggressive
litigation strategy,” said IRS Chief Counsel Don Korb in a statement. “The
word is getting out that there won’t be a better deal waiting if people
take these cases to court.”
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.
 |
