6662(d)(2)(c)(ii)) that the term
tax shelter meant "any plan or arrangement whose significant purpose is to avoid or evade federal taxes" and that therefore a
tax shelter could include an individualized or one-size-fits-all plan.
On its own, outside of the
tax shelter initiatives, Appeals does not have the authority to grant this benefit.
Now with its admission of "unlawful conduct," KPMG--along with law firms and banks with which it jointly sold
tax shelters--will be more vulnerable to lawsuits from
tax shelter clients who had to pay the IRS back taxes and penalties.
Filers who have used
tax shelters and fail to include registration information on their returns could also face nondisclosure penalties as high as $100,000 for individuals and $200,000 for business.
You should always seek professional advice before purchasing a
tax shelter.
These conditions include: 1) fees of more than $100,000 paid to outside firms for assistance in creating the shelter, 2) confidentiality agreements between the participating parties involved in the
tax shelter, 3) sheltering of at least $5 million, and 4) the use of a "straw man" that doesn't gain any tax benefit.
The California
Tax Shelter Resolution Initiative announced in FTB Notice 2006-1 allows taxpayers who participated in the IRS Initiative to avoid most California
tax shelter penalties by participating.
The due date for Form 8886-T depends on whether the entity is a party to a prohibited
tax shelter transaction to reduce its own federal tax liability or whether it is trying to "facilitate" the transaction by reason of its tax-exempt, tax-indifferent, or tax-favored status.
The IRS "cannot simply declare, by fiat, that a fundamental right of taxpayers must be discarded in the agency's fight against
tax shelters.
Individuals and corporations that were ensnared by these schemes were typically approached by a trusted advisor, often a banker, who introduced them to a representative at a large accounting firm who then promoted the
tax shelter device.
The Treasury Department and the Internal Revenue Service (IRS) believe that the most effective way to curb inappropriate
tax shelter behavior is to shine an early spotlight on potentially abusive transactions by requiring detailed tax return disclosures.
Participants can avoid many California
tax shelter penalties, including the interest-based penalty, which amounts to an assessment of an added 100 percent of the interest payable.
