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As part of its continuing battles against tax cheats and illegal tax shelters, the Internal Revenue Service employed the help of the Department of Justice to shut down a national law firm that marketed an illegal tax evasion scheme.

United States Attorney for the Southern District of New York Michael J. Garcia announced that his office entered into a non-prosecution agreement with the law firm Jenkens & Gilchrist for criminal tax violations arising from J&G's tax shelter activities. As part of the agreement, J&G admitted it developed and marketed fraudulent tax shelters as well as to issuing fraudulent opinion letters.

J&G was once a thriving law firm with over 600 attorneys and offices across the nation. But as government scrutiny of the firm intensified, approximately two-thirds of the firm's attorneys left and revenues sharply declined.

"We believe certain J&G attorneys developed and marketed fraudulent tax shelters, with fraudulent tax opinions, that wrongly deprived the U.S. Treasury of significant tax revenues," J&G said in a statement. "The firm's tax shelter practice was spearheaded by tax practitioners in J&G's Chicago office who are no longer with the firm. Those responsible for overseeing the Chicago tax practice placed unwarranted trust in the judgment and integrity of the attorneys principally responsible for that practice, and failed to exercise effective oversight and control over the firm's tax shelter practice… The Chicago tax shelter practice seriously undermined this firm's long-standing reputation, revenues and stability."

J&G, which has been cooperating with the federal authorities since 2004, will remain in operation in Texas to wind up J&G's business and legal affairs.

"While it is unfortunate that the 56-year-old national firm of Jenkens & Gilchrist is terminating its legal practice, this should be a lesson to all tax professionals that they must not aid or abet tax evasion by clients or promote potentially abusive or illegal tax shelters, or ignore their responsibilities to register or disclose tax shelters," said IRS Commissioner Mark W. Everson in a statement. "Pursuing abusive tax shelters is a top priority for the IRS."

The IRS estimates that 1,400 investors took advice from J&G tax attorneys and could owe interest and penalties.

While this is a big win for the IRS, it's merely one of many.

Since taking the lead job at the tax-collecting agency, Everson has aggressively pursued tax cheats and those who promote illegal tax shelters and schemes.

In the last couple of years, Everson's IRS has hammered out agreements with credit card companies to identify American taxpayers who use money in offshore accounts to pay for living expenses — and thus avoid paying income taxes on the money.

Tax cheats beware.

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Steven N. Klitzner is a Certified Tax Resolution Specialist, a member of the American Society of IRS Problem Solvers, a consulting member of the Tax Freedom Institute, and an Aventura attorney.  You can contact him at 305-682-1118 to obtain a free subscription to his newsletter titled The IRS Times & Inquirer or call 305-654-0000 for a free copy of his special report.