Tax Whistleblower Blog

Bond Markets the Subject of Whistleblower Referral

October 14, 2008 – 5:13 am
A Whistleblower, who used to work at a big securities company, has been talking to the Office of the Tax Whistleblower Reward Program, regarding a pricing scheme involving municipal bonds.  The story was first reported by Bloomberg Press.  The Whistleblower alleges that the amount of underreported tax is equal to $300 million. The Whistleblower has told the IRS that issuers are violating IRC section 171(a), which is supposed to prevent buyers from amortizing the premiums paid on exempt bonds.  They may amortize the premiums paid on taxable bonds, but many banks apparently didn't make the distinction.  Banks hold massive proprietary positions of municipal bonds through their treasury, tender-option bond and arbitrage trading desks.  Due to market conditions and investor preference, nearly all tax-exempt bonds are now issued at a premium.  The Whistleblower alleges that some big banks put 6 percent-plus coupons on big maturities, $20 million or more, due in a year, bought those bonds at premium prices of 104 or 105, ...

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Attorney-Client Priviledge Becomes Topic of Discussion by Whistleblower Office

October 14, 2008 – 4:58 am
Stephen Whitlock, director of the Office of the Tax Whistleblower Reward Program, discussed the recently enhanced federal tax whistleblower statute at the Taxpayers Against Fraud annual conference in Washington, D.C., on September 10, 2008.  Whitlock examined issues of confidentiality and attorney-client privilege facing attorneys, accountants, and employee insiders who want to blow the whistle on clients and employers engaged in abusive and fraudulent tax shelter activity.  Whitlock spoke along side Judge Peter Panuthos of the U.S. Tax Court.  Attorney-Client priviledge has been an area of concern for the IRS and practicioners since IRC section 7623 was enacted as law in December 2006.  The issue took center stage after the IRS released Notice 2008-11, wherein the IRS clarified that it will not accept information from an informant who represents the taxpayer in an administrative or litigation matter against the IRS.  Although, the IRS clarified that it will not accept such information, it left open the possibility of accepting ...

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Bureaucratic “RED TAPE” Endangers Cases

October 6, 2008 – 10:11 am
In December 2006, the IRS undertook the bold task of implementing the Tax Whistleblower Reward Program in response to the enactment of IRC section 7623.  The IRS has created a complex set of internal controls and checks & balances to ensure that the Whistleblower Program is carried-out correctly.  However, from the perspective of some, this complex set of internal controls and checks & balances can only be catagorized as harmful "RED TAPE."  Bureaucratic RED TAPE is nothing new when it comes to the IRS.  Generally, practicioners are good at patiently waiting long-periods of time for the IRS to respond to issues.  However, when a Whistleblower case is at stake, waiting may not be an option.  The 3-year statute of limitations on assessment is almost always an issue when a referral is made to the Whistleblower Program.  Thus, the RED TAPE can seriously jeopardize a potential reward and the ability of the IRS to assess unpaid ...

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www.RewardTax.com to Present at AICPA Symposium

September 26, 2008 – 10:15 am
Robert Stientjes and Tom Pliske, the principals of www.RewardTax.com (former IRS attorneys) will be featured speakers at the 2008 AICPA Syposium to be held at the JW Marriott Hotel in Washington, D.C., October 27-29.  The principals of www.RewardTax.com will give a presentation, beginning at 7:00 am on October 28, 2008 regarding IRC section 7623 and the multiple IRS Notices that have been released--which interpret the new law creating the Tax Whistleblower Reward Program.  The principals of www.RewardTax.com would like to give special thanks to Walt Knepper of the accounting firm of Rubin Brown for helping to arrange their presence at the AICPA Syposium.  The AICPA Syposium will feature esteemed experts and industry leaders in the field of tax law and accounting.

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www.RewardTax.com to Speak at AICPA

September 4, 2008 – 5:01 pm
Robert Stientjes and Tom Pliske, principals of www.RewardTax.com, will speak at the 2008 National Tax Conference of the American Institute of Certified Public Accountants (AICPA) in Washington, D.C. on October 28, 2008.  Stientjes and Pliske will discuss the legal requirements for having a claim accepted for processing into the Tax Whistleblower Reward Program, the procedural rules for submitting a case to the Whistleblower Office, and examples of fact patterns that make good cases to refer under the program.  Stientjes and Pliske will be joined in the presentation by a representative of the Whistleblower Office, TBA.  The AICPA is the national, professional organization for all Certified Public Accountants. Its mission is to provide members with the resources, information, and leadership that enable them to provide valuable services in the highest professional manner to benefit the public as well as employers and clients.  The conference will be held at the J.W. Marriott in downtown Washington, D.C.  For more ...

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Whistleblower Program Meets “Girls Gone Wild”

August 22, 2008 – 11:31 am
The Tax Whistleblower Reward Program will see its first primetime exposure in the criminal tax case of CEO Joseph Francis, whose company makes the "Girls Gone Wild" videos.  Francis claims that his fomer top finance executive, Michael Barrett, turned him in to the IRS. Details of the Whistleblower case were revealed last month, in a petition that Francis filed in state court against Barrett claiming that Barrett is responsible for fraudulent deductions of $20,000,000.  The state court suit comes in the middle of Francis's fight against federal charges that he is responsible for the fraudulent deductions.  If convicted, Francis faces up to 10 years in prison.  Francis is scheduled to go to trial this fall.  According to Francis, Barrett reported the alleged fraudulent deductions to the IRS "in order to split the profit with the IRS from taxes, penalties, and interest now due from [Barrett's] accounting mistakes."   There are two important lessons to be learned from the ...

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Most Firms Pay No Tax

August 12, 2008 – 10:06 pm
In a shocking article reported by CNN (http://money.cnn.com/2008/08/12/news/economy/corporate_taxes/index.htm?cnn=yes) the Government Accounting Office (GAO) announced its findings that 68% of American firms do not pay tax despite reaping nearly $2.5 trillion in revenue.  This is the sort of abuse that the Tax Whistleblower Reward Program is designed to curb.  The study was requested by Sens. Byron Dorgan, D-N.D, and Carl Levin, D-Mich., in an attempt to determine if corporations are abusing so-called transfer prices.  Transfer prices are charges on transactions between subsidiary companies within a larger corporate group.  Companies may try to lessen their U.S. tax hit by improperly transferring income to foreign subsidiaries in countries with lower rates.  "In an ever-increasing global economy, this type of abuse has become more and more widespread."  says Tom Pliske, principal of www.rewardtax.com.  International laws and overly-complicated treaties prevent the IRS from effectively combating this type of abuse alone.  Thus, transfer pricing issues, where U.S. income ...

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Accountants as Whistleblowers vs. Ethics

August 8, 2008 – 3:19 pm
As a principal of www.rewardtax.com, I am frequently asked by Whistleblower clients, who happen to be accountants, whether they are at risk for turning in a client for tax malfeasance.  I read a very interesting article this week authored by Cara Patterson that was published by The Trusted Professional, the newspaper of the New York State Society of CPAs (http://www.nysscpa.org/ezine/ETPArticles/print/CP8708.htm).  In the article, the author draws an honest conclusion that an accountant does not have the same handcuffs on reporting their clients' tax malfeasance as, say, an attorney.  The author also points out that it is nearly inconceivable that an accountant could be reprimanded or sued for malpractice for reporting the tax malfeasance of a client.  The Office of the IRS Tax Whistleblower Reward Program has stated to me on numerous occassions that their biggest source of cases thus far is former tax directors or CFOs who separate from their former employer.  In addition, ...

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IRS Tax Whistleblower Office Is Serious. (Part 1 of 3)

August 3, 2008 – 11:51 am
    In operation just over a year, the IRS is showing that it is serious about the new Tax Whistleblower Law (IRC § 7623).  Congress expected big things from the tax whistleblower legislation it passed, which took effect on December 20, 2006.  The IRS has stepped up to the plate and is responding timely and appropriately.       The Internal Revenue Service responded first with the appointment of its director Stephen Whitlock.  Although coordination and implementation are difficult in such a large organization, it has been through Whitlock’s leadership, with the support of both his trained and experienced staff, along with the backing of IRS management, that there have been a series of rules, notices, regulation changes, forms (updated and new), IRM changes, etc. implemented to deal with the numerous issues that exist in this uncharted territory.   As issues arise they are being discussed and dealt with little delay.  There are no secrets.  ...

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Grassley v. Reid

August 1, 2008 – 2:43 pm
          Recently Senator Charles Grassley (R-IA) speaking of the Tax Whistleblower Reward Program praised whistleblowers for their courage and patriotism.  Grassley, perhaps understanding economics, finances, Congress and the American people better than Reid, stated that “whistleblowers often risk their careers to expose fraud, waste, and abuse in an effort to protect not only the health and safety of the American people, but the federal treasury and taxpayer dollars.”  Grassley, in making that statement was speaking of all federal whistleblowers in a speech he gave during National Whistleblower Week.  But he also must have been thinking of the bill that he sponsored resulting in the IRS Whistleblowing Office and the enhanced Tax Whistleblower Reward Program.   However, ten years ago, Senator Harry Reid (D-NV) told Congress that the Internal Revenue Service was paying “snitches to act against associates, employers, relatives and others-whether motivated by greed or revenge-in order to collect taxes.”   Reid discussed ...

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