The Department of Justice has reached an agreement with an attorney accused of engaging in some unscrupulous tax activity. The attorney was allegedly help clients to transfer funds in a way that allowed them to claim tax credits designated for alternative energy fuel sales. The suit filed against the attorney says that he was setting up companies to facilitate “sham” transactions to enable clients to take tax credits. The total amount of improper tax credits claimed is about $16 million.

The attorney is being sued by a group of former clients, a number of whom are professional football players, over their involvement in the unlawful activity.

Cases like this show the importance of making careful decisions when it comes to tax planning and engaging only reliable and trustworthy legal counsel to help guide these plans. An experienced tax law professional will help clients abide by the law and effectively manage their taxes rather that aid them in skirting it in a way that could lead to future liability.

IRS penalties for tax evasion or intentional misreporting can be high, designed to make it not worth the risk to conceal income or claim deductions that do not apply. In this case the attorney is no longer allowed to practice in the area of tax law per the settlement agreement, even though he did not admit to any wrongdoing as a part of the deal. This is one example of a creative solution that prosecutors may come up with to penalize someone for an alleged tax crime.

Source: ABA Journal, “Tax lawyer and DOJ settle suit over claimed $16M shelter scheme; suit by football players ongoing,” Martha Neil, Nov. 11, 2013.