CPAs at risk as government continues to attack abusive tax shelters.
The Tax Adviser › Vol. 39 Nbr. 3, March 2008
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CPAs at risk as government continues to attack abusive tax shelters.
EXECUTIVE SUMMARY
* Through regulations and other forms of guidance issued since 1999, the IRS has clearly put tax practitioners on notice that it considers tax shelter transaction that generate noneconomic tax losses as not allowable for federal income tax purposes. * Legislation in 2004 created significant new penalties for the failure to disclose a reportable tax shelter transaction and for an understatement of tax related to a tax shelter transaction. * In cases involving abusive tax shelter transactions marketed to both business and individual taxpayers, tax practitioners have been severely punished for promoting and selling the transaction and for preparing fraudulent returns based on the transactions. ********** Due to the rapid rise in the use of abusive tax shelters in the 1990s, the government has issued guidance that specifically identifies types of abusive shelters, increased penalties for participating in them, and vigorously prosecuted promoters and sellers of abusive shelters. This article discusses the new rules and penalties and the results of criminal prosecution and civil litigation against tax practitioners involved in abusive tax shelters. Tax avoidance can be defined as legally using tax rules to reduce the amount of tax payable by lawful means. Examples of tax avoidance include accelerating tax deductions, deferring income, changing one's tax status through incorporation, o...See the full content of this document
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