The Internal Revenue Service of the US has offered an olive branch to taxpayers it considers have used a number of transactions solely for t...

The Internal Revenue Service of the US has offered an olive branch to taxpayers it considers have used a number of transactions solely for the purpose of avoiding taxation. More than 4,000 taxpayers have been identified as having used tax-avoiding transactions and the IRS is continuing to uncover more through tax return examinations and the agency’s promoter audit program. The taxpayers involved in the 21 transactions eligible for the program have until January 23 2006 to submit their settlement papers to the IRS. The transactions identified by the IRS are both listed and non-listed, and include schemes involving funds used for employee benefits, charitable remainder trusts, offsetting foreign currency option contracts, debt straddles and lease strips amongst others. Under the settlement terms participants will be required to pay 100 per cent of the taxes owed, interest and, depending on the transaction, either a quarter or a half of the penalty the IRS would otherwise seek. All eligible transactions carry the same settlement terms except the applicable penalty level. “People entered into these deals often at the behest of lawyers and accountants peddling flaky tax products,” said IRS Commissioner Mark W. Everson. “Times have changed. The IRS has acted to shut down these deals, as has the Congress, in passing stiffer disclosure requirements and promoter penalties last fall. We’re offering taxpayers a quick, quiet and cost effective way to put these deals behind them,” he continued.