Tax Whistleblower Blog

Obama Administration Increases Efforts to Pursue International Tax Enforcement

July 2, 2009 – 9:09 am
The IRS has ramped up its efforts in international tax enforcement under the Obama Administration.  The President and the Commissioner of the IRS, Doug Schullman, have declared that enforcement of international taxation matters will be a priority in the next several years, including using tax informants and tax whistleblowers.  As stated in a previous blog, IRS officials announced a expansion by some 800 international revenue agents. For years, the IRS strongly indicated the need for defending the U.S. tax base from corporate inversions and transfer pricing issues.  This need has been accentuated by the current predominance of foreign-initiated adjustments.  The first step is the significant expansion of the IRS examination capacity in international tax matters, which in due course will begin to address the imbalance in the source of adjustments.  A second step will be the enforcement of treaty provisions with foreign countries and the redrafting of weak treaty provisions to allow ...

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Another UBS Client is Convicted

June 26, 2009 – 8:23 am
Another wealthy client of UBS has plead guilty to tax evasion. This marks another criminal who was taken down by the Tax Whistleblower Reward Program. In addition, this victory for the Internal Revenue Service is another benefit of its offshore tax compliance initiative. Steven Michael Rubinstein, an accountant involved in the yacht industry, entering a guilty plea in Federal District Court in Fort Lauderdale, Fla., to a single count of filing a false tax return that did not disclose his offshore account. As part of the deal, he agreed to cooperate with the government in its continuing investigation into scores of UBS clients who have committed offshore tax evasion. Mr. Rubinstein was the first American client of UBS’s offshore private banking services to be arrested, last April in Boca Raton, Fla., when he was charged with one criminal count of filing a false and fraudulent tax return that illegally did not disclose ...

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Courts Confirm that Whistleblower Rewards are Taxable

June 8, 2009 – 10:08 am
Although a qui tam reward is different from a Tax Whistleblower reward under IRC s. 7623, the tax treatment of the rewards should be identical.  The Court of Appeals in Burns v. Commissioner, CA 9, 103 AFTR 2d ¶2009-941, recently held that the Tax Court properly determined that final installment of qui tam reward payment was includable in taxpayer's income for year at issue, even though payment was held in trust account pending bankruptcy court's resolution of creditor's claim against her: taxpayer actually received installment.  The Whistleblower had undisputed right to installment, and the government actually made that payment for her benefit; and, even if bankruptcy court prevented the Whistleblower from disposing of that payment and compelled her to use it to pay her creditor, she obtained economic benefit of income through its disbursement to her trust account for eventual satisfaction of that debt.  Also, to extent the Whistleblower lacked dominion over payment, her voluntary surrender ...

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Cardinal Health Exposed by Tax Whistleblower

May 20, 2009 – 8:23 am
UBS was the first big tax whistleblower case to hit the press.  Cardinal Health has the dubious distinction of being the second.  The IRS is pursuing Cardinal Health for $777 million in unpaid tax plus interest and penalties.  The unpaid tax stems from an international tax shelter facilitated by Rabobank Group, a Dutch bank that has been involved in numerous controversial tax arrangements.  The systematic underreporting of tax was exposed by a former Rabobank executive who exposed his former employer and Cardinal Health.  Cardinal Health announced the situation in a securities statement in May 2009.

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IRS to Hire 800 New Agents to Fight Offshore Tax Shelters

May 19, 2009 – 8:15 am
President Obama has declares war on multi-national corporations' use of offshore tax shelters.  President Obama announced an overhaul of the tax code to "detect and pursue" U.S. tax evaders and go after their offshore tax shelters.  Taxpayers can expect more aggressive action by the IRS in pursuing cases submitted under the Tax Whistleblower Reward Program to close in on the $400 billion tax gap.  In the 2010 budget proposed by President Obama, there is an increase of $400 million dollars for the IRS.  The IRS plans to increase its enforcement budget to $5.5 billion out of the total $12.12 billion IRS budget.   IRS Commissioner Shulman has been emphasizing the importance of greater enforcement as a method of closing the "tax gap."  IRS Deputy Commission Stiff noted that these new agents are the "largest hiring initiative" in recent years.   With the record budget deficits, Washington faces three financial options.  The first is to increase taxes, the second to reduce spending ...

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The Tax Whistleblower Office Song

May 12, 2009 – 2:42 pm
This is too funny not to post.  Reporting tax fraud now has its own theme song....   The IRS Tip Line To the tune of     I Heard It Through the Grapevine By William J. Wilkins       * * Wilmer Cutler Pickering Hale and Dorr LL P, Washington, DC ta x bit es       I The IRS tip line Oo, oo, I bet you wonder how we knew How you didn’t report that million-two It was a disgruntled employee And we paid him a finder’s fee And anyway your neighbors around the block Are calling up the Tip Line around the clock Call us up on the IRS Tip Line If you are witness to a tax crime If you want it, anonymous is just fine We’re just trying to keep the cheaters in line We’ll pay you money, yeah (Call us on the Tip Line if you’re witness to a tax crime, baby, doo doot doo doo doo) People think they can hide from the government But we know how your money’s spent You know it’s really ...

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States That Offer Tax Whistleblower Rewards

April 24, 2009 – 4:08 pm
Seven states have passed laws that allow private individuals to act as Tax Whistleblowers.  These seven states include California, Delaware, Florida, Illinois, Indiana, Nevada, and Rhode Island.  Some of these states have modeled their Whistleblower Acts after the federal False Claims Act.  In addition, some of these states have Whistleblower Acts that exclude income tax--Illinois, Indiana, and Rhode Island.  Thus, these states only allow claims for other forms of unpaid tax such as sales tax.  The remaining four states, California, Delaware, Florida, and Nevada, do not have in place any income tax limitations.

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First Indictment of UBS Client in Bank’s US Tax Evasion Scandal

April 11, 2009 – 10:26 pm
Steven Michael Rubinstein, a certified public accountant, has the dubious distinction of being the first client indicted as a result of the massive IRS effort to end the aiding of tax evasion by Swiss banking giant UBS.  The principals of www.RewardTax.com have previously blogged on multiple occasions about the UBS investigation, which was started because of a tax whistleblower's reporting of tax fraud and conspiracy by the bank.  The whistleblower is a former bank employee that was apparently enticed into spilling the goods on UBS by the December 2006 enactment of the Tax Whistleblower Reward Program. Besides triggering the potential collection of billions of dollars of U.S. tax and penalties, which otherwise would have avoided the IRS’ radar screen; the UBS case has another very positive answer for professionals—the case appears to have made it through the Tax Whistleblower Reward Program in approximately 2 years.  This is much better than the 7-year ...

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Failed Whistleblower Suit for Additional Reward

March 18, 2009 – 10:31 am
Another Tax Whistleblower had his hopes dashed by the U.S. Court of Federal Claims and Court of Appeals for the Federal Circuit, when it was decided by the Courts to dismiss the tax informant's complaint to obtain an additional reward from the IRS, above amounts she already received, for providing the IRS information about her ex-husband's tax law violations. The Courts held that the tax informant failed to show that the IRS was violating any agreement to pay her an additional award. The Courts further held that the facts that IRS sent the tax informant a copy of Publication 733 before she completed the award application, which told her she might receive an additional award in letters accompanying her original awards, and may have ultimately recovered more taxes than amounts on which it based original awards weren't enough to show that the IRS ever actually agreed to any fixed additional ...

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Ongoing UBS Saga

March 6, 2009 – 3:51 pm
The U.S. has filed suit against UBS, the Swiss bank caught in a deplorable scandal involving secret bank accounts for U.S. citizens attempting to evade U.S. tax.  The U.S. is trying to force disclosure of clients' names of as many as 52,000 Americans who have hidden their non-taxed earnings in secret Swiss accounts in an attempt to avoid detection by the IRS. “At a time when millions of Americans are losing their jobs, their homes and their health care, it is appalling that more than 50,000 of the wealthiest among us have actively sought to evade their civic and legal duty to pay taxes,” a representative of the Department of Justice said in a statement. The lawsuit came a day after UBS agreed to pay $780 million in fines and penalties in order to avoid institutional prosecution on its illicit activity of assisting wealthy Americans to commit tax evasion.  UBS continues to argue that it is legally exempt from providing ...

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