Former senator Paul Laxalt is lobbying the Treasury Department to allow wealthy individuals who have invested in questionable tax shelters to escape sizable interest and penalty charges in return for paying the back taxes the IRS says they owe.

The lobbying effort, described as a way to reduce the federal deficit, would save billions of dollars for hundreds of thousands of investors who obtained improper tax writeoffs through the shelters, according to the IRS. Law firms representing some of those investors hired Laxalt's law firm to push the proposal.

The terms Laxalt is seeking would be far more generous than those normally offered by the IRS, which is adamantly opposed to the proposal. Many investors presumably would take advantage of the offer, paying the back taxes rather than waging protracted battles against the IRS.

As a result, supporters estimate, federal tax receipts would rise by as much as $8.6 billion in 1988 and $1.2 billion in 1989. But the proposal would reduce revenue in subsequent years, in part because the Treasury would not be collecting interest and penalties on the contested tax claims.

The Treasury has not yet taken a position on the proposal, although the IRS -- which is part of Treasury -- contends that it is too generous to investors in the questionable shelters and unfair to taxpayers who obey the law. A similar plan was floated on Capitol Hill earlier this year, but attracted little support.

"This is a very problematic proposal from a policy standpoint and a revenue standpoint," said IRS chief counsel William F. Nelson. "It waives past-due penalties and interest with respect to taxes due years ago, at a time when we are asking the American people to pay more than their current tax," as deficit-reduction legislation now under congressional consideration would do.

Laxalt, a Nevada Republican and close friend of President Reagan, declined requests for an interview. He said through a spokesman that he made a "full presentation" of the proposal earlier this month to Treasury Secretary James A. Baker III, whose aides are analyzing the plan. "We have nothing more to add," said spokesman Tom Loranger.

The proposal is the latest version of a long-running lobbying effort, undertaken to seek relief for tax shelter investors being pursued by the IRS, that also has involved a former representative and a Dallas law firm.

The various plans would cover controversial tax reduction strategies involving a wide range of investments, from oil drilling and real estate to movie production, that were most popular in the late 1970s and early 1980s. According to the IRS, the most malodorous shelters were those in so-called tax straddles, complex transactions based on trading on futures exchanges. Until Congress cracked down in 1981, the shelters were creating losses -- tax deductions -- that far exceeded the amount of money invested by the taxpayers.

Congress has wrestled since 1981 with various proposals to set settlement terms for investors in those pre-1981 straddles, but thousands of cases remain in litigation with the IRS and would be covered by the proposal.

Included among the shelter-seekers who would benefit from the plan are nearly 3,000 investors in a straddle scheme ruled illegal by the Tax Court last month. The IRS says the proposal would save those taxpayers a total of $1.5 billion under the proposal -- roughly $500,000 apiece.

The judge in that case said the shelter was set up with no profit motive, but instead involved only "frivolous and illusory" transactions designed to avoid taxes. According to the opinion by Special Judge Carleton D. Powell, the shelter allowed investors essentially to request the amount of losses they wanted for a given year. The shelter's managers then manipulated their purchases of forward contracts for government securities to produce that amount.

Powell likened the shelter to "a computer spitting out paper showing huge transactions that had no economic significance except in petitioners' attempts to raid federal and state fiscs."

"The wearing of judicial robes does not require that we take leave of common sense," Powell wrote in response to the taxpayers' contention that the shelter was a bona fide investment. He also warned attorneys not to bother bringing further cases defending clients in this shelter, saying he would consider imposing penalties for frivolous litigation if they did.

A Dallas law firm that defended several investors in the shelter, which was called First Western Government Securities, has financed lobbying efforts to obtain settlements that would benefit its clients. The firm, Taylor & Mizell, was behind an earlier version of the settlement proposal when it was lobbied on Capitol Hill last summer by Bishop, Cook, Purcell & Reynolds, and has financed studies indicating the plans would increase federal revenue.

Lawyers at Laxalt's firm -- Finley, Kumble, Wagner, Heine, Underberg, Manley, Myerson & Casey -- said none of their client firms represented investors in First Western. Finley, Kumble attorney Paul Perito declined to provide names of the client firms, and Robert C. Taylor of Taylor & Mizell did not return telephone calls.

The investors in First Western represent a small fraction of the taxpayers who could benefit from the proposal, which probably would require congressional action. There are about 47,000 tax shelter cases awaiting Tax Court trial, and more than 450,000 other taxpayers are in the early stages of IRS examinations. Many of the schemes the service is now challenging attracted thousands of investors. A few shelters involved as many as 7,500 individuals.

Among the multitude of investors involved in the disputes is a former congressman who used to help write tax laws. Former representative Joe D. Waggonner (D-La.), who retired in 1978, has been asking members of Congress over the last two years to support legislation that would make it easier for him to pay money the IRS says he owes due to a commodity tax straddle.

Waggonner, who was a key swing vote on the tax-writing House Ways and Means Committee in the 1970s, asked at least two senators during congressional consideration of last year's tax-revision law to support a provision that would give him relief, congressional sources said.

The Senate bill included the provision, but the commodity-shelter section of the final version of the law was inconclusive. Waggonner earlier this year also was involved in lobbying for a variant of the shelter-settlement plan, according to government and private sources.

Sources said Waggonner apparently would benefit if the Laxalt proposal became law. In a telephone interview from his Shreveport office, Waggonner confirmed he had "a tax shelter," but declined to provide additional details. He said he was not affiliated with the Laxalt effort.

The Laxalt plan would not assist the millions of taxpayers who are involved in disputes with the IRS over matters other than tax shelters. Those who have been assessed with penalties and interest over more mundane matters would still have to pay.

"It seems to be selective in the sense that it singles out people with tax shelters and not those who claim too large a child-care deduction," Nelson said.

Proponents of the settlement proposal say it would clear the massive backlog of cases that is clogging the IRS examination system and the dockets of Tax Court. It would free up IRS auditors to go after other types of tax cheaters, bringing in additional revenue. Much of the money that would flow in under regular collection procedures would not be paid for years, when inflation would make the dollars worth less.

"What we are saying is, we don't believe it is an unjustifiable windfall. Each of these people will pay their full tax deficiency," Perito said. "What we are talking about is an abatement of interest and penalties."

In a study commissioned by supporters of the plan, the Policy Economics Group of the accounting firm Peat Marwick Main & Co. concluded that the government would net $7.3 billion in additional revenue from 1988 through 1990 if 80 percent of eligible taxpayers accepted the offer. The study was paid for by Taylor & Mizell, sources said.

"You get a lot of money up front; you lose money down the road," said Linden C. Smith of Peat Marwick. "Over the long run, it is a revenue loss, though not a dramatic revenue loss."

The offer would exclude cases that involved fraud or covered tax shelter promoters. The proposal would not include taxpayers whose cases already have been decided by a court, but the judge's opinion covered only 10 of First Western's 3,000 investors, leaving about 2,990 of that company's investors who could take advantage of the proposal if it were implemented.

The IRS questions supporters' revenue estimates. Officials pointed out that the cases that would be settled already have been audited and in some cases appealed, so their settlement would not make additional resources available. IRS officials fear the revenue cost could be greater than estimated because taxpayers who previously settled their tax-shelter cases would attempt to reopen them to gain the proposal's more favorable treatment.

Nelson also said that investors with weak cases, involving the most questionable shelters, would be most tempted by the offer, while those who felt themselves innocent would continue to fight. The settlement proposal thus would have the government extending the best deal to the worst violators.