Tax Shelter Voluntary Compliance Program

              As part of an on-going effort
between many states and the
Internal Revenue Service (IRS),
Illinois has passed new laws (Public
Act 93-840) to discourage
participation in tax avoidance
transactions (tax shelters). In general,
the new laws mandate specific
filing procedures and registration
requirements for taxpayers
participating in tax shelter activities,
as well as the promoters of tax
shelter opportunities.
In addition, the laws outline new,
stringent penalties for taxpayers
and promoters that do not comply
with the tax shelter laws. In order to
help taxpayers make the transition
to the new reporting requirements,
Illinois will be offering a Voluntary
Compliance Program (VCP) for
taxpayers that failed to report their
full taxable income because they
participated in tax shelter
transactions.
The purpose of this bulletin is to
provide general information about
tax shelters, the VCP requirements,
and the new associated penalties
for tax shelter abuse.
What is the definition of a tax
shelter?
A tax shelter is the common name
for a “tax avoidance transaction.” A
tax avoidance transaction means
any plan or arrangement devised
for the principal purpose of avoiding
federal income tax, and includes
Tax Shelter Voluntary Compliance Program
FY 2005-06
August 2004
Illinois Department of Revenue
Informational Bulletin
For information
or forms...
To:
All taxpayers having investments in tax shelters and all tax
preparers completing tax returns on behalf of taxpayers who have
investments in tax shelters.
Call us at:
1 800 732-8866 or
217 782-3336
Call our TDD
(telecommunications device
for the deaf) at:
1 800 544-5304
Write us at:
Illinois Department of Revenue
P.O. Box 19044
Springfield, IL 62794-9044
Visit our Web site at:
www.ILtax.com
Call our 24-hour
Forms Order Line at:
1 800 356-6302
Brian A. Hamer
Director of Revenue
Printed by authority of the State of Illinois
8,000 copies - 8/04 - P.O. Number 2050140
but is not limited to, “listed transac-tions”
as defined by the IRS.
What is a “listed transaction”?
A “listed transaction” is a transaction
that is the same as or substantially
similar to one that the IRS has
determined to be a tax avoidance
transaction and identified by IRS
notice or other form of published
guidance.
What is the Voluntary
Compliance Program (VCP)?
The VCP is a program that allows
taxpayers who underreported their
taxable income by participating in
tax shelters to come forward and
pay the associated Illinois Income
Tax liability without incurring any of
the new penalties that have been
put into effect for participating in tax
shelters.
What are the dates for the VCP?
The VCP period for reporting and
paying additional Illinois Income Tax
liability will be from October 15, 2004,
through January 31, 2005.
Who is eligible to participate?
The VCP is available to any
taxpayer who
filed an Illinois Income Tax
return using a tax shelter to
reduce their taxable income, or
did not file an Illinois Income Tax
return as a result of participating
in a tax shelter.
This bulletin is written to
inform you of recent
changes; it does not replace
statutes, rules and regula-tions,
or court decisions.