Prosecutors indict web of players involved in tax shelters

Seven people involved in setting up tax shelters sold to wealthy individuals were indicted by federal authorities, including the chairman and chief executive of BDO Seidman and a well-known tax attorney.

Those indicted include BDO Seidman executive Denis Field and tax attorney Paul M. Daugerdas, according to The New York Times.

The indictment said one shelter, known as SOS, was sold to 550 wealthy clients and generated $3.9 billion in bogus tax losses in two years, the Times reported.

The Times said the indictments are the largest crackdown on tax shelter promoters since mid-2005. At that time, the accounting firm KPMG admitted to wrongdoing over its work with questionable shelters and paid $456 million to the government to settle the case.

Congress considers bill to stop use of offshore tax havens

Congress is considering bills to curb use of offshore tax havens to evade U.S. taxes through a variety of measures.

Similar bills were introduced by Sen. Carl Levin (D-MI) and others in the Senate and U.S. Rep. Lloyd Doggett (D-Texas) and Rep. Rosa DeLauro (D-CT) in the House. Sen. Carl Levin (D-MI) filed an earlier version of the Stop Tax Haven Abuse Act in 2007, which then Sen. Barrack Obama supported. But the bill didn't pass.

"With White House leadership, we can finally win approval of our legislation to shut down offshore tax cheats," Doggett said in a statement. The steps proposed include treating foreign corporations managed and controlled in the United States as domestic corporations for income tax purposes

See Levin's statement about the legislation and The National Law Journal's report on the lobbying efforts. (Subscription required.)

Ouster of UBS executive may indicate cooperation with IRS

Swiss bank UBS has removed the top executive who was in charge of secret offshore accounts for wealthy Americans, The New York Times reported.

UBS's decision to place banker Martin Liechti on paid leave "raises questions about what kind of client information UBS may be preparing to provide to federal authorities, who are widening their scrutiny of American clients suspected of tax evasion and seeking to force the bank to turn over the names of 52,000 clients," the Times said.

IRS will trade leniency for information

Citizens who voluntarily pay taxes owed on offshore assets could escape criminal prosecution if they provide the Internal Revenue Service with information about the bankers who helped them hide their assets, according to The Wall Street Journal.

"A key part of the program, IRS officials said, is 'developing intelligence' on bankers, lawyers, accountants and others who help the rich hide assets from tax authorities," the Journal reported.

The Journal has posted the IRS guidelines on its website.

IRS tightens reporting requirements on offshore accounts

In another effort to hinder efforts to evade taxes on offshore accounts, the Internal Revenue Service is tightening certain reporting requirements.

The changes include requiring taxpayers to specify on the Foreign Bank Account Report the exact amount in offshore accounts. The Wall Street Journal reports that the IRS also is considering whether to implement changes to its "qualified intermediary" program with foreign banks that would better enable the IRS to ferret out accounts held by U.S. tax evaders.

White House task force formed to examine tax system

The Obama administration is looking for ways to reform the U.S. tax system and to aggressively reduce the tax gap, such as by attacking tax evasion.

Administration officials announced March 25 that a task force headed by former Federal Reserve Chairman Paul Volcker will study options and make recommendations to the President by Dec. 4. Volcker is now head of Obama's new Economic Recovery Advisory Board.

For comments by Office of Management and Budget Director Peter Orszag about the tax reform task force, see Reuters' story, Volcker panel to study tax reform, report to Obama.

Treasury report skeptical of "Son of Boss" settlement impact

Nearly one-fourth of the investors in the "Son of Boss" abusive tax shelter who participated in a settlement with the Internal Revenue Service failed to file their returns on time, paid their taxes late or failed to file returns at all, according to a report by the U.S. Treasury Inspector General for Tax Administration.

Investors in the tax shelter paid $3.8 billion in the settlement to avoid prosecution by the IRS. "Despite the success achieved, the Son of Boss settlement had little effect on investor filing and payment compliance," the report said.

The report, including the IRS response, is available on the U.S. Treasury website.