IRS Makes Settlement Offers To Selected Tax Shelter Users

by Mike Godfrey, Tax-News.com, Washington

08 October 2002

The Internal Revenue Service has made settlement offers to companies and individuals who made use of selected types of tax shelters, according to a report in the Wall Street Journal on Monday.

The IRS has reportedly hinted that the partial amnesties will not last more than a few weeks, and has suggested that those tax evaders who refuse to come out of hiding during that period should not expect clemency when they are eventually discovered. However, given the relatively disappointing results of other recent tax shelter settlement offers, the agency may be wise not to raise its hopes too high.

The WSJ revealed yesterday that one of the shelters currently under the spotlight is targeted at wealthy individuals, and creates large artificial losses to offset the gains realised by the taxpayer. The IRS is prepared to settle, according to the Journal, for around 80% of the tax owed by anyone who comes forward.

The second type of shelter allows companies to double the tax losses claimable from future liabilities, such as environmental cleanups.

According to the WSJ: 'The IRS terms on this deal are more flexible, involving arbitration, and are likely to produce more lenient results for taxpayers than other settlement programs. In part, that is because the companies could make a better court case that these moves relate to business needs, rather than pure tax avoidance.'

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