Archives For Whistleblower

This infographic takes a look at major tax policy changes in U.S. history. Along the way, it highlights a “slippery slope” of scandals ranging from serious mishandling of taxpayer funded organizations to unethical behavior by the IRS.

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Last month, the IRS came underneath scrutiny for outright denying applications for certain organizations looking for a tax-exempt status. Perhaps, the IRS should look closer at the National Football League’s (NFL) tax-exempt status instead.

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Lately, a few disgruntled whistleblowers have been going to Tax Court to try to roust the IRS and get what they believe to be their fair share to the crooked pot. But rousting the IRS can be a tough sell.

Take William Prentice Cooper III, who took on the IRS in Cooper v. Commissioner. An attorney, Cooper claimed evidence that estate tax scofflaws failed to pay millions in estate tax and generation-skipping tax. Cooper claimed the IRS could grab up to $200 million in tax.

Sounds like the kind of information the IRS would be interested in, no? When the IRS denied his claims, he went to Tax Court, which dismissed his claim too. Why? The IRS examined his allegations and decided not to pursue them.

In a whistleblower case, said the Tax Court, its jurisdiction is limited to reviewing the IRS’s award determination. The court can’t go into the merits of the claim, nor can it decide whether the IRS should have gone after someone or should have collected. That’s just not how it works.

Cooper learned of major omissions of assets from an estate resulting in up to a $75 million underpayment in Federal estate tax. His second claim alleged that two trusts were part of a scheme to avoid tax. But the IRS wasn’t impressed and denied his claims about nine months after he filed them. The IRS didn’t take action and that mean there was no revenue. That meant Cooper couldn’t get a share.

That may seem harsh or arbitrary, but the Tax Court doesn’t have the ability to order the IRS to go after someone, no matter how juicy the claim might sound. In a similar case involving a CPA, Raymond Cohen, the accountant had his claim denied and met the same fate. Cohen learned from his wife about uncashed company checks in an estate. A searching of State filings supported his theory that the company was stashing about $700 million worth, he claimed.

But his IRS claim was denied. In Tax Court, he claimed the denial was arbitrary and he was entitled to a legal and factual explanation. The Tax Court just said no. The IRS didn’t collect—for whatever reason—and that meant there was no share for Cohen. Cohen even tried to invoke equitable relief but the court said it wasn’t a court of equity.

Bottom line? After the Birkenfeld whistle-blowing case, there will be many more disappointed whistleblowers. All you can do is make your claim as compelling as you can and cross your fingers.

JDKatz, P.C. is a full-service law firm focused on tax law and estate planning. We are dedicated to minimizing your existing liability and risks while providing valuable tax planning to streamline your tax issues in the future. Please call us at 301-913-2948 to schedule an appointment to meet with one of our trusted attorneys.

 

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Bradley Birkenfeld, the former UBS banker credited with helping break open Uncle Sam’s investigation into secret untaxed Swiss accounts, is about to be $104 million richer.

The Internal Revenue Service has recommended that Birkenfeld receive that impressive amount after he has now served around two and a half years in federal prison for a fraud conspiracy conviction related to the case.

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It’s the largest whistleblower amount ever awarded by the IRS.

Birkenfeld’s insider info helped the IRS collect more than $5 billion in unpaid taxes from foreign banks and nearly 15,000 individuals who used their services to avoid paying U.S. taxes, as well as was a motivator in the Swiss government decision to change its tax treaty with the United States and turn over the names of more than 4,900 U.S. taxpayers who held illegal offshore accounts.

In addition, since the UBS investigation began, more than 35,000 taxpayers have participated in amnesty, or as the IRS prefers to call them offshore voluntary disclosure programs.

Ask and you could receive: The IRS didn’t agree to give Birkenfeld the reward out of the goodness of its heart. Rather, Birkenfeld did what any other tax cheat reporting taxpayer would do; he filed a reward claim with the tax agency.

Under federal law, a whistleblower could be entitled to a reward of between 15 percent and 30 percent of the total previously unpaid tax that is collected. There is no limit on the dollar amount that can be paid out to tax cheat reporters.

Birkenfeld’s lawyers released a redacted IRS summary award report that praised the former banker for providing comprehensive information that was “exceptional in both its breadth and depth.”

Birkenfeld was not in Washington, D.C., for today’s announcement of his award. He’s still serving three years’ probation under home confinement. His attorneys are seeking a presidential pardon for Birkenfeld.

Ratting out tax cheats: If you have information about someone or some company that is ingoing tax responsibilities, follow Birkenfeld’s lead. Well, at least the part about reporting the tax misdeeds.

If you suspect or know of an individual or company that is not complying with the tax laws, you may report this activity by completing Form 3949-A. You may fill out the form online, print it and mail it to the Internal Revenue Service in Fresno, CA 93888. (No street address necessary. The Post Office knows where to find the Fresno IRS office.)

If you prefer, you may send a letter instead of the form to the Fresno address. In that case, the IRS would like you to include, where possible, the following information:

  • Name and address of the person you are reporting,
  • The taxpayer identification number (Social Security number for an individual or employer identification number for a business),
  • A brief description of the alleged violation, including how you became aware of or obtained the information,
  • The years involved,
  • The estimated dollar amount of any unreported income, and
  • Your name, address and daytime telephone number.

The IRS says you don’t have to reveal your identity. But if information on a tax cheat entitles you to a reward, giving your name and contact info is the only way the IRS will know where to send the money.

You also can file Form 211 to request a whistleblower award. The IRS has more information at its special whistleblower award claim Web page.

Also check out the IRS memo on what to expect when providing the agency with information about tax evasion.

That system has improved over the years, but it still takes a while and requires the actual collection of substantial unpaid taxes before the IRS Whistleblower Office says thanks to tax tattletales with cash.

Still, under the right circumstances, the tax cheat reporting and wait can be very rewarding. Just ask Bradley Birkenfeld.

JDKatz, P.C. is a full-service law firm focused on tax law and estate planning. We are dedicated to minimizing your existing liability and risks while providing valuable tax planning to streamline your tax issues in the future. Please call us at 301-913-2948 to schedule an appointment to meet with one of our trusted attorneys.

Amid allegations against the IRS for having a terribly organized and inefficient whistle-blower program, the IRS has decided to review the program and improve its backlog and working practices. According to Steven T. Miller, Deputy Commissioner for Services and Enforcement, the IRS will work with “internal and external stakeholders on a comprehensive review of operating guidelines and procedures…to improve the timeliness and quality of decisions.”

The improvements include:

  • Whistleblower Office-claims received should be initially evaluated by the Whistleblower Office within 90 days.
  • Operating Divisions and Criminal Investigation-review by subject matter experts should be completed within 90 days of receipt.
  • Whistleblower Office-whistleblowers should be notified of an award decision within 90 days of when collected proceeds can be finally determined.

This is a drastic improvement to their previous turn-around rate of 7 years. Currently the IRS whistle-blower office operates with 35 employees, however in order to achieve these lofty goals, the IRS will have to hire more able-minded people to expedite the process. Deadlines will be closely monitored with internal performance reviews for IRS agents and offices working on whistler-blower cases.

According to IRS procedures, agents may only speak with the whistle-blower once during the investigation due to the concern of divulging confidential information. Once the 90 days are complete of the initial review, tipsters will be notified of whether their case is eligible and how much their rewards will be.

Advocacy groups like “Taxpayers Against Fraud” (Washington based interest group that promotes IRS reform and encourages whistle-blowers) would like the IRS Commissioner Douglas Shulman to speak in support of the whistle-blower initiatives. Shulman has yet to voice his opinions on the matter and many are feeling silence is the loudest form of communication at this point.

Whether Shulman voices his support or not, the IRS whistle-blower office made drastic changes that will streamline operations in a timely and efficient manner. Let’s just hope more people will feel comfortable speaking out against any unethical tax procedures.

JDKatz, P.C. is a full-service law firm focused on tax law and estate planning. We are dedicated to minimizing your existing liability and risks while providing valuable tax planning to streamline your tax issues in the future. Please call us at 301-913-2948 to schedule an appointment to meet with one of our trusted attorneys.