Many people who settled with the Internal Revenue Service in the "Son of Boss" tax shelter case continued to have tax compliance problems after the settlement, according to a Treasury Department report.

Of 1,103 individuals who participated in the 2004 IRS Son of Boss settlement, 300 failed to meet tax filing or payment obligations for the period 2004-2006. That is 27% of all Son of Boss settlement participants.

The finding is from a report by the Treasury Dept. Inspector General for Tax Administration (TIGTA), released Monday.

"Our evaluation... showed that the settlement's participants were far less likely to meet their Federal tax obligations without IRS intervention than the general taxpayer population," the report states.

The IRS disputed the findings and called the report "flawed" in a Monday statement.

IRS issued a settlement offer to Son of Boss tax shelter investors in 2004. TIGTA tracked individual tax returns for Son of Boss investors to determine whether they had run afoul of tax rules subsequent to the settlement. The violations it tracked-failure to file a return and failure to pay on time-are two of the most common tax mistakes and most frequent reasons IRS penalties are assessed.

The report suggested that part of the reason for continued compliance problems may be that the tax shelter agreements do not include adequate enforcement and disclosure provisions.

For example in another IRS settlement program, the so-called offer-in-compromise program, the IRS can withdraw the settlement agreement and resume collection activities, if taxpayers do not meet all obligations in the five years after the settlement. But that is not the case with the Son of Boss settlements.

In addition, those who enter into offers-in-compromise agree to have their names and the amount of their settlements made public.

A 2004 study of a sample of taxpayers that reached "offers-in-compromise" with the IRS showed 96% compliance rates.

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