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IRS Obtains More Than 100 Injunctions Against Tax Scheme Promoters
By: Richard Chapo
The IRS announced today that it has obtained civil injunctions against more than
100 promoters of illegal tax avoidance schemes and fraudulent return preparers
in an ongoing crackdown that began in 2001. Many of the injunctions, obtained in
cooperation with the Department of Justice, also order the promoters to turn
over client lists and to cease preparing federal income tax returns for others.
Signaling a renewed fight against tax fraud, the federal government stepped up
the use of civil power four years ago. Civil injunctions have subsequently been
used to stop:
1. Abusive trusts that shift assets out of a taxpayer’s name but retain that
taxpayer’s control over the assets.
2. The misuse of “Corporation sole” laws to establish phony religious
organizations.
3. Frivolous “Section 861” arguments used to evade employment taxes.
4. Claims of personal housing and living expenses as business deductions.
5. "Zero income” tax returns.
6. Abuse of the Disabled Access Credit.
7. The claim that only foreign-source income is taxable.
The IRS identifies abusive tax promoters through a variety of means, including
ongoing examinations, Internet and media research or referrals from external
sources such as tax professionals. If the findings of an investigation support a
civil injunction, the IRS refers the case to the Department of Justice.
If the Justice Department concurs, it files suit against the promoter requesting
that the court order the promoter to refrain from the fraudulent activity.
Depending on the facts and circumstances of the case, the court may issue a
temporary restraining order, a temporary injunction or a permanent injunction.
At present, the courts have issued injunctions against 99 abusive scheme
promoters –– 81 permanent injunctions and 18 preliminary injunctions. They have
issued permanent injunctions against 17 abusive return preparers. The Justice
Department has filed an additional 49 suits seeking injunction action –– 28
against scheme promoters and 21 against return preparers.
The IRS is currently investigating more than 1,000 additional promoters for
possible referral to the Justice Department and conducting individual
examinations on thousands of tax scheme participants.
About the Author:
Richard Chapo is CEO of http://www.businesstaxrecovery.com - Obtaining tax
refunds for small businesses for overpaid taxes. Discovery tax strategies and
deductions in our tax articles section.
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