The Internal Revenue Service has collected more than $3.2 billion in back taxes, interest and penalties from participants in a single tax shelter, including $100 million from one taxpayer and $20 million each from 18 others, the agency said today.
The total take for the agency from participants in the shelter is expected to top $3.5 billion ultimately, making this by far the largest such program ever, IRS Commissioner Mark W. Everson said.
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Everson said that nearly 1,200 of the approximately 1,800 taxpayers -- mostly wealthy individuals but including a few corporations -- who made use of the shelter known as "Son of BOSS" had agreed to the settlement. Another 200 were barred from the program because they had also been involved in marketing the shelter.
"The IRS will vigorously pursue" the remaining 400 "who did not come forward. We have their names. We are going to give them special treatment, putting them at the head of the line for audits," Everson said, adding that the agency "will litigate the matter vigorously in court" if necessary.
The $3.2 billion is cash that the IRS has in hand, Everson said. Neither he nor other IRS officials would give names or discuss details of individual cases, but Everson did say that "some people have had to sell their villas or their yachts and come up with the cash to cover their debt to the government."
A few had to work out installment agreements with the agency, he said.
The Son of BOSS initiative is one of a series of steps the IRS has taken during the past several years to try to rein in the explosive growth in tax shelters that arose during the boom of the late 1990s.
That growth also coincided with attacks by the Senate Finance Committee on the IRS for what the panel claimed were abuses of its own. Those hearings were followed by a new law bringing sweeping changes in the structure of the IRS and increased focus on service to taxpayers.
Everson and his predecessor, Charles O. Rossotti, have conceded that tax enforcement suffered during that period, perhaps encouraging aggressive accountants and attorneys to devise schemes that they thought would be difficult for the IRS to detect or to challenge.
In seeking to reverse that, the agency has looked for ways to track down shelters more effectively than simply looking through hundreds of millions of tax returns hoping to find them. As part of that, it has sought access to paper trails that it hoped would lead it to large numbers of participants. In doing so, it has won important backing from the courts.
First, the courts granted the IRS access to records from credit card companies, such as Visa, MasterCard and American Express, of customers who have card issued by offshore banks. An initiative based on those records brought in $270 million, Everson said.
Then the IRS won the right to subpoena client lists from accounting and law firms that it had linked to abusive shelters. Those client lists are now allowing the agency to track down participants in shelters like Son of BOSS.
