Internal Revenue Service: Efforts to Identify and Combat Abusive 
Tax Schemes Have Increased, but Challenges Remain (22-MAY-02,	 
GAO-02-733).							 
                                                                 
The Internal Revenue Service (IRS) characterizes an abusive tax  
scheme as any plan or arrangement created and used to obtain tax 
benefits not allowable by law. According to IRS, abusive tax	 
schemes fall into four categories: frivolous returns, frivolous  
refunds, abusive domestic trusts, and offshore schemes. IRS	 
estimates the potential revenue loss from abusive tax schemes to 
be in the tens of billions of dollars annually. Developing	 
accurate estimates is difficult because of the limited numbers of
cases examined and investigated. IRS identifies and examines	 
abusive tax scheme promoters and participants through its Small  
Business and Self-Employed Division and Criminal Investigation.  
In fiscal year 2000, IRS created a program that focuses on false 
and frivolous schemes. IRS has also created new offices that	 
focus exclusively on abusive tax schemes that use legal 	 
structures like domestic and offshore trusts and partnerships.	 
IRS coordinates with federal agencies to identify, monitor, and  
prosecute promoters and participants in abusive tax schemes.	 
These activities range from sharing information and detection	 
techniques with agencies such as the Securities and Exchange	 
Commission and the Federal Trade Commission to assisting in the  
prosecution of fraud related cases with the Department of	 
Justice. IRS participates in work groups that share information, 
skills, and procedures. These work groups discuss procedures for 
combating fraud on the Internet and the use of civil injunctions 
against promoters of abusive tax schemes.			 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-02-733 					        
    ACCNO:   A03395						        
  TITLE:     Internal Revenue Service: Efforts to Identify and Combat 
Abusive Tax Schemes Have Increased, but Challenges Remain	 
     DATE:   05/22/2002 
  SUBJECT:   Crimes or offenses 				 
	     Fraud						 
	     Income taxes					 
	     Interagency relations				 
	     Program abuses					 
	     Strategic planning 				 
	     Tax administration 				 
	     Tax evasion					 
	     Tax exempt status					 
	     Tax violations					 
	     Taxpayers						 
	     IRS Abusive Tax Schemes Program			 
	     IRS Frivolous Return Program			 
	     IRS National Fraud Program 			 
	     IRS Anti-Money Laundering Program			 
	     IRS Questionable Refund Program			 

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GAO-02-733
     
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