Federal prosecutors have arrested a New York-based Internal Revenue Service agent on tax fraud charges, according to a published report.Harry Willner, 59, who has been an IRS agent for more than three decades, was charged with five counts of tax fraud on Monday. Federal prosecutors have accused him of cheating on his personal income taxes, as well as offering loopholes to other taxpayers.

Willner handled audits of large financial institutions and was a team coordinator of fellow revenue IRS agents as part of a Large and Mid-Size Business Division unit in the city, according to the U.S. Attorney for the Southern District of New York.

Allegedly, Willner created the tax loopholes through an advertising business he operated out of his home. NIA Advertising Inc. claimed a bad debt reduction on its 2002 corporate tax return of more than $758,000 -- the result of a nearly $850,000 loan the ad company purportedly made to another company between 1998 and 2001, although prosecutors said that Willner provided no evidence of a written contract or agreement to verify the debt.

According to the indictment, Willner was unable to take advantage of the reduction because the income from his business was minimal, so he then tried to get an accountant to have other taxpayers funnel their income through the ad business to take advantage of the large debt.

Willner also allegedly tried to use the debt as a deduction by having his fee as a teacher at Manhattan private schools paid to the ad business, rather than directly to him.

Willner, who lives in Fairlawn, N.J., faces 15 years in prison and $45,000 in fines, if convicted on the charges.

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