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Justice Dept. Sues Accounting Firms WASHINGTON, July 10, 2002 In an effort to stop abusive tax shelter transactions, the Justice Department Tuesday filed enforcement actions against accounting firms KPMG LLP and BDO Seidman to enforce 29 summonses that request tax shelter documentation. According to the court filings, KPMG has failed to provide all the documents the IRS has requested in connection with its probe into KPMG’s compliance with these requirements and its potential liability for penalties. Although KPMG has produced many documents to the IRS, it has also withheld a substantial number of documents that the government has requested.
Similarly, the court papers filed in the case against BDO Seidman seek to obtain information concerning tax shelter transactions that the Government believes BDO Seidman has marketed. BDO denies that it has promoted any such transactions.
The tax code requires promoters of tax shelters to register each tax shelter with the IRS before offering it for sale. It also requires promoters and sellers of certain tax shelters to keep lists of all the investors in each shelter, and to make that list available to the IRS on ten days’ notice. Promoters and sellers that do not register the tax shelter or maintain or produce to the IRS the list of investors may be liable for penalties. The tax code also imposes penalties for promoting abusive tax shelters. "Today’s action demonstrates that the IRS will vigorously use all enforcement authority available to it to obtain essential information from promoters of tax shelters," stated IRS Commissioner Charles Rossotti. "It is unacceptable for those holding themselves out as tax professionals providing legitimate tax advice to refuse to comply with legal disclosure requirements."
To date, the IRS has issued 43 informal requests for information to entities to determine compliance with these tax shelter requirements. In connection with 29 examinations, the IRS has issued 148 summonses to 11 entities. The summonses requested records, testimony, and other information needed to assess whether those entities should have registered transactions and maintained lists of investors.
Other efforts by the IRS to shut down abusive tax shelters included a window for taxpayers to voluntarily disclose to the IRS their participation in tax shelters and other questionable transactions; the deadline for this was April 23. In exchange for information about disclosed transactions and items, the IRS promised to waive certain accuracy-related penalties that might apply to an underpayment of tax. Since then, over 1,600 voluntary disclosures has resulted in more than $30 billion in claimed losses and deductions.
2002 SmartPros Ltd. All Rights Reserved.
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