The Internal Revenue Service (IRS) works to protect American taxpayers from unscrupulous individuals who promote improper and abusive tax schemes as well as tax return preparers who deliberately prepare improper returns. The IRS uses a variety of methods to address these issues, from public awareness campaigns to civil and criminal investigations, which can result in penalties, civil injunctions and in some cases prison sentences.
The IRS Lead Development Center (LDC) is constantly working to combat tax abuse by stopping abusive promoters and tax return preparers as early as possible. The IRS relies on help from taxpayers to identify promoters of “too good to be true” tax schemes and tax preparers using improper methods to avoid paying taxes.
As mentioned above, one of the many tools the IRS uses to address these individuals is a civil investigation conducted by specially trained revenue agents. Some of these investigations are initiated from information received or developed by the LDC. The LDC then authorizes the revenue agent to conduct an in-depth investigation into the information received.
The LDC works a significant number of referrals each year, from both internal and external sources, that provide information on tax schemes and abusive tax return preparers. The LDC follows up on each referral and ensures that cases involving abusive tax schemes and improper tax return preparation are appropriately sent for further IRS action, including sending cases to Criminal Investigation.
To ensure past IRS efforts are effective, the LDC regularly follows up on injunctions secured against promoters and tax return preparers by verifying that they remain in compliance with the terms of the court orders. You can find more information about civil injunctions and contempt proceedings on the Department of Justice website.
Abusive tax schemes cause harm to both the Federal government and taxpayers who participate in them. Taxpayers should be wary of these schemes, those who do get involved can face a heavy tax burden that includes taxes owed, and the addition of substantial penalties and interest.
If you know of one of these schemes, or an abusive tax return preparer, send a completed Form 14242, Report Suspected Abusive Tax Promotions or Preparers (PDF), along with any supporting materials to the LDC.
Internal Revenue Service Lead Development Center
24000 Avila Road
Laguna Niguel, California 92677-3405