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'Think twice' for the tax man cometh
Feds turn the heat up on fraudulent tax-scheme promoters and tax-return preparers.
April 6, 2005: 2:53 PM EDT

WASHINGTON (CNN) - With the income-tax filing deadline fast approaching, top IRS and Justice Department officials Wednesday announced a sharp increase in prosecutions of tax cheats and promoters of tax scams.

In a meeting with reporters, the government's two top-ranking tax enforcement officials said the prosecutions against 1,381 defendants for tax crimes last year represents a 57 percent increase over the level of prosecutions in 2001, when enforcement efforts were expanded.

"If you're thinking about cheating on your taxes, think twice," warned Internal Revenue Service Commissioner Mark Everson. "People who promote, facilitate or engage in tax fraud are risking penalties and, where appropriate, criminal prosecution," said Assistant Attorney General Eileen O'Connor.

Federal authorities have, in particular, targeted promoters of fraudulent tax schemes. The officials said that in the three-year crackdown courts have so far issued injunctions against 99 tax-scheme promoters and 17 tax return preparers. The IRS says it is continuing to investigate more than 1,000 additional tax-scheme promoters for possible Justice Department prosecution.

Returns of all the individuals who were participants and stood to benefit from the schemes are also being examined.

O'Connor said many of the tax criminals sentenced in the past year received jail time and had to pay restitution. According to the IRS:

  • A Florida promoter of schemes to hide income and assets offshore received a 17-year prison sentence and was ordered to pay a $20 million fine and $6.5 million in restitution to the IRS.
  • Another Floridian was sentenced to 10 years in prison and ordered to pay $1.6 million in restitution for evading tax payments and impeding the IRS.
  • An Ohio man received a 12-year sentence and was ordered, along with two convicted co-defendants, to pay restitution for defrauding the government of $4 million in taxes.
  • A Utah man who sold sham trusts received a 6-year sentence this year.
  • And a New Hampshire man was sentenced to serve six years in prison for preparing more than 200 income-tax returns that falsely claimed the taxpayers had no income at all.

Officials said examples of common offenses in which injunctions have been brought included:

  • Creation of illegal trusts that shift assets out of a taxpayer's name but let the taxpayer retain control over the assets;
  • Establishment of phony religious organizations;
  • Improper claims that only foreign-source income is taxable; and
  • Claims of personal housing and living expenses as business deductions.

For a look at Americans' attitudes toward tax cheating, click here. And to see how much taxpayers have stiffed the IRS, click here.  Top of page

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