Tax Whistleblower Blog

How Do Tax Whistleblowers Reconcile the Diebold Case?

August 10, 2009 – 11:17 am
In 2003 , Stephen Heller blew the whistle on an illegal scheme by Diebold to use uncertified software on their voting machines in the state of California, which would have compromised the voting process and voter confidence.  Heller blew the whistle on the company's plan to defraud California voters when he exposed documents he saw while working as a temp worker at Diebold's California law firm, Jones Day.  Diebold had been advised by Jones Day that what it had been doing with its uncertified software was illegal.  The courageous act, from which Heller stood to gain nothing (he, in fact, was fired for it) led to the decertification of Diebold in the state by former Sec. of State Kevin Shelley, and then to the eventual settlement between the company and the state of California for $2.6 million in 2004.  In 2007, Heller was indicted by the Los Angeles District Attorney's Office on criminal charges.  Do tax ...

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The UBS Plot Thickens (and Stinks)

July 30, 2009 – 8:41 am
On July 28, 2009, Jeffrey P. Chernick, a former client of UBS Bank, pled guilty to filing a false tax return in violation of I.R.C. s. 7206.  However, in the midst of changing his plea to guilty, he revealed that a, yet unnamed, attorney had told him that a high-ranking Swiss official had accepted a bribe in exchange for ensuring that Chernick's name would not be handed over to the IRS as part of the investigation and summons-enforcement case brought by the IRS against the embattled bank.  The Swiss official purportedly accepted a payment of $45,000.  Despite the bribe, Chernick's information was given to the IRS as part of UBS's $780,000,000 settlement in February.  The UBS saga was initiated by a Whistleblower pursuant to the Tax Whistleblower Reward Program.  In light of this revelation, the principals of http://www.RewardTax.com are concerned about what other manipulation and tainting of information could be occurring ...

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Another UBS Client is Indicted

July 28, 2009 – 1:38 pm
http://www.RewardTax.com has just learned that another American client of UBS has been indicted for having a secret Swiss bank account maintained by UBS.  This marks the the third UBS client to be indicted for a similar offense this year.  Jeffrey Chernick was charged in Florida with using UBS to evade U.S. taxes.  He is expected to plead guilty to one count of tax fraud for filing a false tax return for 2007.  The indictment of this individual and the larger UBS summons enforcement case, which has attracted national headlines for almost a year is the product of a claim filed under the Tax Whistleblower Reward Program.

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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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