S.C. to track tax evaders

The Internal Revenue Service announced a new partnership Tuesday with South Carolina and 39 other states aimed at cracking down on tax evasion.

The IRS will share information about abusive tax avoidance transactions and taxpayers who use them with administrators in those states.

"We'll be working more closely with the Internal Revenue Service, training together and using the same resources in an effort to track down people abusing the tax system through illegal tax shelters," said Danny Brazell, S.C. Department of Revenue spokesman. "We'll be going after tax abusers together."

The Multistate Tax Commission, an organization of state governments, estimated this summer that South Carolina loses $80 million a year in undetected corporate tax shelters alone.

There is no estimate on how much money is sheltered illegally by individuals, Brazell said.

It's not certain how much money the state could recoup through the program, but Brazell said he expects partnering with the IRS to be more efficient.

"We should be able to save money because we're pooling our resources, employees and talent," he said.

The new partnership will target tax evasion among businesses and individuals. It comes as cash-strapped states are examining their budgets and looking for new sources of revenue. State tax administrators estimate they will recoup about 20 cents for every dollar the IRS collects.

South Carolina currently has a deficit of more than $150 million.

The agreement, negotiated over the past year, focuses only on tax evasion. The coordination will allow IRS and state agencies to avoid duplicate investigations and reduce the need for duplicative audits.

IRS commissioner Mark Everson said routine tax matters will not be shared among the federal government and the states.

"We treat taxpayer privacy as a top priority," he said. "This agreement does not impede our high standards for protecting taxpayer rights or privacy."

The Multistate Tax Commission estimated states lose billions of dollars each year in undetected corporate tax shelters. The group said states lost somewhere between $8.3 billion and $12.4 billion in 2001.