Reportable Transactions Resources - Article
Natural persons who fail
to disclose a reportable
transaction to the IRS
are subject to a $10,000
penalty. Other
nonreporting taxpayers
are subject to a $50,000

The penalties are
increased to $100,000
and $200,000,
respectively, for natural
persons and other
taxpayers who fail to
disclose a reportable
transaction that is a
listed transaction
The IRS Says:
516 - 935 - 7346
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Published: October 28, 2010
by: Gerson Lehman Expert Contributor

By Lance Wallach


Some people refused to believe that their participation in a 419e, 412i, or listed transaction would cause them problems. Now the
IRS is adding agents to its Abusive Transactions Group. Will they believe it now?

Full Analysis
Here it is. Here is proof of my predictions. Perhaps you didn’t believe me when I told you the IRS was coming after what it has
deemed “abusive transactions,” but here is the proof; right from the IRS’s own job posting. If you were involved with a 419e, 412i,
listed transaction, abusive tax shelter, Section 79, or captive, and you haven’t yet approached an expert for help with your situation,
you had better do it now, before the notices start piling up on your desk.

A portion of the exact announcement from the Department of the Treasury:

Agency: Internal Revenue Service
Open Period: Monday, October 18, 2010 to Monday, November 01, 2010
Sub Agency: Internal Revenue Service
Job Announcement Number: 11PH1-SBB0058-0512-12/13

Who May Be Considered:
  • IRS employees on Career or Career Conditional Appointments in the competitive service
  • Treasury Office of Chief Counsel employees on Career or Career Conditional Appointments or with prior competitive status
  • IRS employees on Term Appointments with potential conversion to a Career or Career Conditional Appointment in the same
    line of work

According to the job description, the agents of the Abusive Transactions Group will be conducting examinations of individuals, sole
proprietorships, small corporations, partnerships and fiduciaries. They will be examining tax returns and will “determine the correct
tax liability, and identify situations with potential for understated taxes.”
These agents will work in the Small Business/Self Employed Business Division (SB/SE) which provides examinations for about 7
million small businesses and upwards of 33 million self-employed and supplemental income taxpayers. This group specifically goes
after taxpayers who generally have higher incomes than most taxpayers, need to file more tax forms, and generally need to rely
more on paid tax preparers.” Their examinations can contain “special audit features or anticipated accounting, tax law, or
investigative issues,” and look to make sure that, for example, specialty returns are filed properly.
The fines are severe. Under IRC 6707A, fines are up to $200,000 annually for not properly disclosing participation in a listed
transaction. There was a moratorium on those fines until June 2010, pending new legislation to reduce them, but the new law
virtually guarantees you will be fined. The fines had been $200,000 per year on the corporate level and $100,000 per year on the
personal level. You got the fine even if you made no contributions for the year. All you had to do was to be in the plan and fail to
properly disclose your participation.

You can possibly still avoid all this by properly filing Form 8886 IMMEDIATELY with the IRS. Time is especially of the essence now.
You MUST file before you are assessed the penalty. For months the Service has been holding off on actually collecting from people
that they assessed because they did not know what Congress was going to do. But now they do know, so they are going to move
aggressively to collection with people they have already assessed. There is no reason not to now. This is especially true because
the new legislation still does not provide for a right of appeal or judicial review. The Service is still judge, jury, and executioner. Its
word is absolute as far as determining what is a listed transaction.

So you have to file Form 8886 fast, but you also have to file it properly. The Service treats forms that are incorrectly filed as if they
were never filed. You get fined for filing incorrectly, or for not filing at all. The Statute of Limitations does not begin unless you
properly file. That means IRS can come back to get you any time in the future unless you file properly.
If you don’t want these new IRS Agents, or any other IRS agents for that matter, to be earning their paychecks by coming after you,
make sure you have done all you can to ensure that you have filed properly by reaching out for expert help today.

Lance Wallach, National Society of Accountants Speaker of the Year and member of the AICPA faculty of teaching professionals, is
a frequent speaker on retirement plans, financial and estate planning, and abusive tax shelters. He writes about 412(i), 419, and
captive insurance plans. He gives expert witness testimony and his side has never lost a case. For more information visit www. or

The information provided herein is not intended as legal, accounting, financial or any other type of advice for any specific
individual or other entity. You should contact an appropriate professional for any such advice.
Notice: IRS Hiring Agents in Abusive Transactions Group
Call 516-935-7346
Call 516 935-7346