From
the IRS Website
IRS
Obtains More
Than 100 Injunctions Against Tax Scheme Promoters
FS-2005-15, April 2005
The
Internal Revenue Service 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:
Abusive
trusts that shift assets out of a taxpayer’s name but retain
that taxpayer’s control over the assets.
The misuse of “Corporation sole” laws to establish
phony religious organizations.
Frivolous “Section 861” arguments used to evade employment
taxes.
Claims of personal housing and living expenses as business deductions.
"Zero income” tax returns.
Abuse of the Disabled Access Credit.
The claim that only foreign-source income is taxable.
The IRS becomes aware of abusive 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 injunctions against
17 abusive return preparers –– all permanent injunctions.
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.
“I
encourage the public to bring questionable promotions and abusive
preparers to our attention,” said Kevin M. Brown, commissioner
of the IRS Small Business/Self-Employed Division, which conducts
most of the IRS investigations. “We give serious attention
to every referral we receive.”
To
report an abusive tax scheme promoter or return preparer, taxpayers
can call the tax fraud hotline at 1-800-829-0433.
