News agencies were abuzz about Wednesday’s Supreme Court decision stating the IRS could not use the extended, six-year statute of limitations to collect unpaid taxes from a business, Home Concrete & Supply, LLC in a tax shelter case. Robert Wood of Forbes in his article HUGE Taxpayer Win: Supreme Court Tells IRS 3 Years to Audit Is PLENTY! believes the historic decision regarding this tax shelter case will have a “trickle-down effect” and impact dozens of related cases who might be breathing a collective sigh of tax relief from this ruling.
The tax code allows the IRS to audit 3 years back, but an IRS audit can be extended to 6 years in cases where a taxpayers don’t report 25% or more of their income. Home Concrete & Supply LLC, happened to be a business the IRS has been watching as part of an investigation and crackdown on the “Son of Boss” tax shelters; a case that involved omitting 25% of gross income.
What are “Son of Boss” Tax Shelters?
A Reuters article Supreme Court restrains IRS in tax shelter case, explained the significance of “Son of Boss” shelters to the IRS:
- These tax shelters first appeared in the late 1990s.
- They have become some of the costliest tax schemes in U.S. history.
- “Boss” is an acronym for “bond and option sales strategies”
- They create paper losses that offset real gains.
- The IRS began its crackdowns on “Son of Boss” shelters in 2000.
- By 2005, 1,165 people had settled such cases with the IRS.
- These schemes use inherently complex structures that are difficult for IRS investigators to uncover within a three year period.
The History of Home Concrete & Supply, LLC
Home Concrete & Supply was a limited liability company formed in 1999 by North Carolina businessmen, Robert Pierce and Stephen Chandler, who owned a small oil and coal company. The company was formed specifically to facilitate a “Son of Boss” scheme. Here is a timeline of their IRS tax issues:
- Filed 1999 taxes in 2000.
- Audited for 1999 by the IRS in 2006.
- Billed in 2006 for $6 million in unpaid taxes.
- That same year, the partners sued the IRS claiming the agency only had three-year statute of limitations to claim their unpaid taxes.
Subsequently, this case went all the way to the Supreme Court where it ruled in the company’s stating that 3 years not 6, was sufficient time for the IRS to collect their back taxes. The high court’s ruling dashed $1 billion in tax revenues from about 30 related cases involving “Son of Boss” tax shelters the IRS was anticipating.
But don’t be fooled, the IRS may be down but certainly not out! Recent collection statistics show enforcement efforts especially for unreported offshore accounts paying off; $2.7 billion alone was gained in tax revenues from 2009 & 2011 from the Offshore Voluntary Disclosure Initiatives.
Remember: All unpaid back taxes whether they are illegal tax shelters or tax liens involve steep fines and IRS penalties that increase daily. Don’t wait for the IRS to approach you – hire an expert tax attorney or certified tax resolution specialist who can bring you into IRS compliance and help you avoid any tax problems in the future.
More Tax Help, IRS News and Tax Relief Tips:
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- Offshore Tax Evaders Get Preferred IRS Help
- Treasury Proposes Multilateral Agreement for Offshore Compliance
- Tax Resolution Services Offers Returning Veterans Free Tax Advice
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