Taxpayers Voluntarily Disclose Questionable Transactions

The Internal Revenue Service's 120-day amnesty program for encouraging taxpayers to disclose participation in tax shelters ended in April, 2002, and since that time the IRS has been sifting through 1,664 disclosures that were made by 1,206 taxpayers who participated in the program. This represents an impressive number of participants, especially considering that 60 days into the program only 21 taxpayers had stepped forward with information. Those taxpayers alone disclosed more than $1 billion in reported tax deductions from tax shelters.

IRS field agents are making their way through the tax shelter disclosures, contacting taxpayers and resolving outstanding tax issues, all without the threat of penalty hanging over the heads of participating taxpayers.

The IRS program, launched last winter, was one in a series of steps the IRS has undertaken to identify and shut down inappropriate tax shelter activity. Information obtained from the amnesty program is being used to identify promoters of illegal or abusive tax shelters as well as additional participants in the shelters. Tax shelter promoters are required to keep lists of all investors that bought tax shelters from them. The goal of the program is to identify taxpayers who participated in shelters and failed to disclose shelter activity on their tax returns as well as to shut down abusive tax shelters.

"Using information from these lists, the IRS will pursue investors who participated in abusive transactions, but did not disclose them," said Larry Langdon, IRS commissioner of large and mid-size business.

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