The Internal Revenue Service has announced a broad-based, time-limited opportunity for taxpayers to come forward and settle an array of transactions the IRS considers abusive. Taxpayers who undertook these deals have until January 23, 2006 to submit their settlement papers to the IRS.

The initiative identifies 21 transactions eligible for the program. Consisting of both listed and non-listed transactions, they include a wide cluster of schemes involving funds used for employee benefits, including "reimbursements" for parking expenses previously paid by an employer or previously paid by an employee through salary reduction, and "reimbursements" of employees for salary reduction amounts previously excluded from gross income. All eligible transactions carry the same settlement terms except the applicable penalty level.

Under the settlement terms, participants, both individuals and companies, will be required to pay 100 percent of the taxes owed, interest and, depending on the transaction, either a quarter or a half of the penalty the IRS will otherwise seek. There is penalty relief for transactions disclosed to the IRS or where the taxpayer got a tax opinion from an independent tax advisor. Transaction costs paid by the taxpayer to do the deal, including professional and promoter fees, will be allowed.

...back to 27 October 2005

Further information:
IRS Launches Abusive Transaction Settlement Initiative
IRS Settlement Initiative
Part IV - Items of General Interest
Announcement 2005-80 Transaction-Specific Settlement Provisions

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