Tax Whistleblower Blog

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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IRS Seeks Voluntary Disclosures and Whistleblowers for Swiss-aided Tax Scheme

February 18, 2009 – 8:55 pm
"People who have hidden unreported income offshore need to get right with their government. They should come forward and take advantage of our voluntary disclosure process," an IRS spokesman says.  The IRS is also seeking Whistleblowers to report such tax cheats.  Switzerland's largest bank, UBS, has admitted helping U.S. taxpayers hide money from the IRS, and has agreed to pay $780 million in fines and restitution, and to turn over account information.  It is unknown whether this enforcement effort is a derivative of a tax informant, but, if so, someone is going to receive a very healthy reward for their efforts.

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Who Gets Paid When There Exists Multiple Claims: Part Three

February 7, 2009 – 11:05 pm
In addition to the reasoning set forth in last week's blog; also consider that IRC section 7623 is patterned after Qui Tam litigation and the False Claims Act.  Under the False Claims Act, the party who files his or her lawsuit first gets paid while any subsequent filer gets nothing.  Further reasoning why, the first to submit a claim under the Tax Whistleblower Reward Program beats any subsequent Whistleblowers.

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Who Gets Paid When There Exists Multiple Claims: Part Two

January 31, 2009 – 10:46 pm
Several weeks ago, I wrote a blog about the topic of who gets paid when there exists multiple claims.  After having additional time to mull over the question and after discussions with other former IRS attorneys about the issue, I decided that another blog regarding the issue is merited.  I, and other Tax Whistleblower Attorneys, have determined that this issue is one of the major issues that remains unanswered in this area of the law--What happens when the Whistleblower Office receives multiple claims for reward on the same taxpayer from separate informants?  There does not exist a clear answer to this question based on current published guidance. This question was posed to Steven Whitlock, head of the Tax Whistleblower Reward Program, at the January 9, 2009 Conference of the American Bar Association–Division of Taxation.  Whitlock responded to the hypothetical by stating that his office has not yet run into this issue because no claims ...

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The Tax Whistleblower Reward Program Turns Two

January 26, 2009 – 10:15 am
In a recent speach before the American Bar Association, the IRS announced that the Tax Whistleblower Reward Program is more successful than anticipated.  A large spike in submitted claims in 2008 shows that the new whistleblower law is "working as it was intended" since it was revised two years ago, said IRS Whistleblower Office Director Stephen Whitlock.  Part of the law's initial success can be seen in the public's awareness of it, Whitlock told the American Bar Association Section of Taxation at the fall meeting in San Francisco on September 12. In December 2006, Congress turned to the American people to expose taxpayers (i.e., individuals, businesses, estates, and trusts) who underreport and fail to pay tax. As part of the Tax Whistleblower Reward Program, the United States announced that it will reward any person who provides information that leads to the identification of $2 million or more of unreported tax, including ...

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California Joins Florida in Offering a State Tax Whistleblower Reward

January 22, 2009 – 9:45 pm
The Franchise Tax Board, California’s version of the IRS, offers a comparable Whistleblower Reward Program.  Under the legislation, that was proposed by the Terminator himself, Gov. Arnold Schwarzenegger and passed with bi-partisan support, the state of California gives confidential informants as much as 10% of the unpaid taxes collected as a result of a whistleblower’s tip.  California’s version of the Tax Whistleblower Reward Program, like the federal program, is due in part to the state’s growing tax gap--roughly $6.5 billion in 2005 alone. Officials do not want hunches based on the spending habits of the guy next door. They want bank account numbers, canceled checks and receipts that help them go after big fish: people and companies hiding more than $50,000 in income. Since California created its reward program, other states – which often follow the Franchise Tax Board’s lead – may do the same.  Florida also has a reward program in place, but the program is very different from the ...

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Who Gets Paid When There Exist Multiple Claims?

January 13, 2009 – 12:10 pm
What happens when the Whistleblower Office receives multiple claims for reward on the same taxpayer from separate informants?  There does not exist a clear answer to this question based on current published guidance. This question was posed to Steven Whitlock, head of the Tax Whistleblower Reward Program, at the January 9, 2009 Conference of the American Bar Association--Division of Taxation.  Whitlock responded to the hypothetical by stating that his office has not yet run into this issue because no claims for reward under the new statute are at the stage of determining award amounts.  However, he stated that his office WILL NOT be giving out multiple awards.  Thus, it appears from Whitlock's statements that the IRS will be choosing between two informants--the victor will receive a full reward, and the loser will receive nothing.  The big question that remains is how will the Whistleblower Office determine who to choose?  Previously, I presumed that the Whistleblower ...

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Tax Court Amends Rules to Protect Confidentiality of Whistleblowers

January 5, 2009 – 12:07 pm
A Whistleblower can challenge the nonpayment of a reward or the amount of a reward, under the Tax Whistleblower Reward Program, in the U.S. Tax Court.  In response to public comments, on October 3, 2008, Tax Court Rule 340 was issued to update the processes and procedures with the goal of enhancing confidentiality.  The new rule allow a Whistleblower to file a complaint using only his or her state of legal residence (or the District of Columbia, or any commonwealth, territory, or U.S. possession) in order to establish venue, on a petition for additional disclosure, petition to restrain disclosure, or petition to disclose identity.  Although no complaints have, yet, been filed--challenging the IRS's determination of a reward--it appears that the Tax Court is moving towards a proceeding where the Whistleblower may challenge the amount of a reward without his or her identity becoming public record.  This is extremely important to protect confidentiality, ...

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