IRS ‘Turning The Corner’ In Tax Enforcement Says Agency Chief

by Leroy Baker, Tax-News.com, New York

05 July 2004

More than 1,500 taxpayers came forward under the Internal Revenue Service’s recent crackdown on users of so-called ‘Son of Boss’ schemes, evidence, the IRS said, that the agency is beginning to win the fight against abusive tax schemes.

According to IRS figures, around 85% of those identified by the agency as having used Son of Boss schemes in the past agreed to settle ahead of the June 21 amnesty deadline. Furthermore, some 300 taxpayers not previously known to the IRS as having involvement in such transations also disclosed their activities.

"I don't want to convey that we're declaring victory, but we've turned a corner," announced IRS Commissioner Mark Everson. He added that the “credibility of a tough enforcement posture has been re-established".

Son of Boss was derived from an earlier scheme used in the late 1990s to offset large one-off gains such as the sale of a business, which was known simply as ‘Boss’ (bond and option sales strategy).

The IRS claims that the many transactions undertaken through Son of Boss schemes generated tax losses of between $10 million and $50 million, and led to a total understatement of tax in excess of $6 billion.

The terms of the amnesty were a lot tougher than previous amnesty programs. Taxpayers who agreed to settle with the IRS were made to pay 100% of the claimed tax losses, plus all applicable interest and penalties, typically 10% to 15% of the unpaid tax.

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