For about the last seven years, the IRS and the Department of Justice have been aggressively seeking out and prosecuting taxpayers involved in tax reduction programs which were sold to them by either their Tax Attorneys, Financial Planners, Accountants and Life Insurance agents.
Most of these programs were first created by the largest firms in the country and therefore, most taxpayers who participated in these programs properly relied on these big name firms for the programs legal basis. I have even seen programs sold by the largest banks, largest life insurance companies and largest tax firms in the world.
I have even read articles in national magazines and newspapers touting the benefits of these programs.
But what I have come to learn during my many years of practice is that regardless of the legality of the program when it began, if the IRS and the Department of Justice wish to terminate a program sold to the public, they will come up with a way to make it illegal.
For decades, Legal Tax Firms, financial planning firms and insurance companies have made their money by coming up with new ways to reduce taxes for their clients. The theory has been to create a better program which takes advantage of certain tax laws in order to reduce one's income taxes, with the hopes that they can attract more clients due to the better mouse trap they've created. These programs are then sold to the public at very high prices or generate large commissions to make it worth while for the agents from these firms to participate in the marketing of these programs. It's a very competitive business world out there and to stand out above the rest, it's important to have something the competition doesn't have.
However, even though these programs were initially considered legal, once the IRS and the Department of Justice have determined to shut it down, I have learned that it takes very little effort for them to turn a legal program into an illegal one.
Furthermore, in my own personal experience, I have found that the very same firms which marketed these programs often later claim their fifth amendment rights and refuse to come to a taxpayers aid when confronted with a potential criminal indictment for the program they've either created or sold. In one case, I even had a life insurance agent refuse to even admit that he marketed a program in fear of being indicted for his participation. It really is like roaches scattering when the lights are turned on when these firms are challenged by the IRS and Department of Justice regarding the legality of their programs.
On the other side, I have even seen the Government completely ignore the legal documentation supporting the legality of a program and instead focus on the taxpayer for wanting to participate in a program to reduce his taxes. Then the Government challenges anything the taxpayer says regarding things they were told by the firms as heresay if the matter goes to court. Leaving the taxpayer with no defense at all!
After all, the Government doesn't like it when taxpayers take action to reduce their taxes, it's unamerican.
I even had one Attorney told me that they spoke to an agent for the Criminal Division of the IRS and was told that the IRS was shutting down one particular program because in the view of the IRS, they couldn't have a program out there teaching people how to reduce their taxes, because the Government would loose to much money.
Therefore, I have learned that there are so many ways to challenge the legality of a program that it just doesn't make sense to get involved in any program which hasn't been around for at least ten years and has IRS law identifying it and explaining it in detail. To do so otherwise, just creates a nightmare later on. The money spent defending a challenge by the Government will never even come close to the tax savings generated by the program itself.
Therefore, if you have an agent, attorney or accountant telling you that they have a new program which will save you money on taxes, run the other way!
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