"Both our work and that of the IRS suggest that the prospect of losing benefits contributes to a high level of voluntary filing and payment compliance, which is key to reducing the tax gap," said J. Russell George, the Treasury Inspector General for Tax Administration.
But in its statement, the IRS said it is wrong to compare offers-in-compromise, a simple administrative procedure where the tax liability is not in dispute, and the more complex tax shelter settlements.
"The Son of Boss settlement was an overwhelming success for the IRS and the nation's taxpayers," according to the IRS statement. "The settlement quickly resolved a large number of cases on terms that were advantageous to the government, and led to billions of dollars being collected without costly and time-consuming litigation."
The IRS also noted that, as stated in the TIGTA report, Son of Boss investors who failed to file a return or pay in time were assessed penalties totaling almost $30 million.
In the Son of Boss tax shelters, taxpayers used artificial losses from certain bond or option transactions to offset real taxable income. IRS said it netted about $4 billion in taxes, interest and penalties from the settlement.
Median income in 2005 for investors in the Son of Boss tax shelters was $470,355, according to the TIGTA report.