The IRS’s plans to create a new unit to examine high-income taxpayers with complex offshore tax structures could prove to be a boon to both accounting firms and tax attorneys.

Clients will need advice from both their accountants and lawyers about some sophisticated tax structures and how to unwind them if the IRS decides that they don’t look kosher from a tax compliance perspective. The law firm Miller & Chevalier has already issued an alert to their clients apprising them of the IRS’s plans.

The IRS is going to be adding some heavy-hitting expertise from its Large and Mid-Size Business Division to look into the sophisticated tax entities that individuals can create with their tax advisors. In some instances, such structures are created by companies for their top executives to help them deal with their copious salaries and benefits.

“We are aware of situations where requests have been made for key corporate executive returns where this group has been mentioned,” said Don Rocen, a former deputy chief counsel of operations with the IRS from May 2004 to July 2007 who is now a member of Miller & Chevalier’s tax practice.

“This isn’t to suggest that corporate executives aren’t compliant taxpayers,” he told me. “As one becomes wealthier, one has more transactions on one’s tax return. That being the case, the IRS wants to be sure they understand the tax profile of these individuals and assure themselves that it is as it should be. They want to make sure that it is understood that they do have a presence in this area and assure those to whom they are accountable that this is the case.”

His colleague, Anne Batter, vice chair of Miller & Chevalier’s employee benefits practice, works more with corporations than individual taxpayers, but she noted that in her experience, most corporations comply with the tax laws, as they are subject to more regular scrutiny than ordinary individual taxpayers.

“From that perspective we have to remind our executives that the IRS audits you, and it will probably be a more sophisticated group, and they should take what actions are necessary,” she said.

Accounting firms are likely to be called on to do more handholding with worried executives now that the IRS is setting up the new unit. Those executives will now have more reason to be concerned that the IRS will put them in its cross-hairs. Smart firms will be able to market more services to this niche. Law firms and tax attorneys have already been inundated with inquiries from clients worried about the IRS’s recent voluntary disclosure program, especially former UBS clients. The new initiative is an outgrowth of the UBS probe, and as that probe expands, expect the IRS to issue more letters to prospective targets.

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