TIGTA: Some Tax Shelter Promoters Not Disciplined

The IRS’ Office of Professional Responsibility (OPR) was unaware of a significant number of licensed tax practitioners who had been assessed penalties, enjoined by federal courts or criminally sentenced for promoting abusive tax shelters, the Treasury Inspector General for Tax Administration (TIGTA) found in an audit. As a result, the practitioners were still able to represent taxpayers before the IRS. The OPR regulates the conduct of licensed tax professionals.

From IRS records, TIGTA identified 280 individuals who potentially represented taxpayers and were assessed penalties in 2005 through 2007 for tax-shelter-related violations. More than half of them (143), currently representing 8,787 taxpayers, did not show up in OPR records of disciplinary proceedings. TIGTA was able to confirm that 73 were licensed preparers. Another 70 were listed as attorneys, CPAs or enrolled agents (but TIGTA could not confirm their licensure). Nine of the practitioners not in OPR disciplinary records had been enjoined by a court from promoting tax shelters, and eight had been criminally prosecuted.

OPR relies on other IRS employees to refer to it, for discipline, practitioners who violate Circular 230, the regulation that governs the practice of CPAs, attorneys and enrolled agents before the IRS. TIGTA had determined in an audit released in March 2006 that IRS operating divisions lacked records of referrals and that OPR had not recorded all cases that were referred. The current findings most likely stemmed from a continuing failure of IRS enforcement personnel to refer cases to OPR, TIGTA said.