Archive for September, 2010
Saturday, September 25th, 2010
Tax fraud refers to the intentional engagement in illegal schemes in order to avoid paying taxes legally required by the federal government. Individuals and corporations who commit tax fraud may be subjected to both civil and criminal penalties.
There are a variety of methods employed by individuals and corporations to illegally avoid paying taxes. Some of the most common types of tax fraud include:
- Off shore accounts fraud
- Corporate tax fraud
- Employment tax fraud
- Money laundering tax fraud
- Abusive tax shelters
It is important to understand that tax fraud does not need to occur in order for the IRS to recover money. Under the Tax Whistleblower Program, an informant with knowledge of any form of tax underpayment, whether legal or illegal, may report this information to the IRS. If the IRS chooses to pursue your claim, you may be eligible to receive between 15-30% of all recovered funds including unpaid taxes, penalties, and interest, provided that the total recovery is at least $2 million.
The attorneys at Kenney & McCafferty have been handling tax fraud claims for more than a decade. We are committed to helping fight fraud against the government. Over the years, we have helped the federal government recover millions of dollars in unpaid taxes, resulting in lucrative rewards for our clients.
If you have knowledge of tax underpayment totaling more than $2 million, please contact our tax whistleblower attorneys today. Kenney & McCafferty will consult with you about your case, without obligation. All communications with Kenney & McCafferty attorneys regarding your case are confidential and protected by attorney-client privilege.
Thursday, September 23rd, 2010
In 2006, President Bush signed the Tax Relief and Health Care Act of 2006. Among other important financial provisions, Section 406 of the Act deals specifically with the creation of the IRS Whistleblowers’ Office and augmentation of whistleblower awards. One of the first cases to be decided under the 2006 Act was William Prentice Cooper, III (Petitioner) v. Commissioner of Internal Revenue (Respondent, “Commissioner”). This case was filed July 8, 2010. Mr. Cooper, however, was not the beneficiary of the increased whistleblower awards; rather, his case tested the efficacy of the newly-instated “No Action Letter” in the Whistleblower Office Manual. Before discussing the nuances of the “No Action Letter,” it’s important to understand some of the background information behind this case.
Petitioner Cooper was representing the grandson of Ms. Dorothy Dillon Eweson when he realized, through his own examination of the trusts in question as well as public records, a large-scale tax evasion scam to avoid paying a generation-skipping transfer tax. Knowing this evasion was explicitly illegal, Petitioner Cooper filed a claim with the IRS Whistleblower Office in which he submitted newly discovered filings from a New York Surrogate Court proceeding in which a corporate trustee challenged the trust modifications as designed primarily to evade taxation. A legal memorandum and draft legal documents from Ms. Eweson’s attorneys indicating the trusts were modified as part of a scheme to avoid the generation-skipping transfer tax.
After receiving these documents, the Whistleblowers Office sent Cooper a letter stating, in short, that the claim did not involve any tax payments that the Service would be interested in pursuing, and would thus be ineligible for an award. After a number of motions from either side, the Tax Court determined that the IRS acted in a timely and fair manner in accordance with the IRS manual, and after even more appeals by Cooper, Tax Court eventually determined that it did indeed possess the jurisdiction to review the Service’s determination of Cooper’s claim. Thus, the Commissioner’s claim that Tax Court did not possess the jurisdiction to review whistleblower cases was denied. What does all this mean for the future of whistleblowing, and what is the “No Action Letter”?
Despite the fact that Petitioner Cooper did not obtain a monetary award, this case was still a landmark in that it set precedent for the power of the “No Answer Letter” as well as the jurisdiction for Tax Court. The court ruled that this official notice from the IRS, also known as the “No Action Letter,” does act as a final determination (correspondence officially stating the IRS’s verdict). According to Section 7623 (b), this letter is an official administrative document. In combination with the initial letter from the Commissioner, the two letters acted to grant Petitioner the full appeal rights. Though this may seem like a small point, the precedent is huge. Many whistleblower claims will no longer be subject to the whims of the IRS because they are now protected by appeal procedures established by the 2006 Act.
For the full text of Section 7623 (b), please click here
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Wednesday, September 22nd, 2010
The federal government has established certain laws and guidelines governing the amount of taxes we are required to pay. When an individual or corporation participates in illegal schemes or activities intended to avoid paying taxes which are required by law, tax fraud has occurred. This is a serious offense that can result in both civil and criminal penalties.
It is important to understand the difference between tax avoidance and tax fraud. Tax avoidance involves using government-approved means to reduce the amount of taxes owed. This is completely legal. Tax fraud, on the other hand, occurs when the means used to reduce tax liability no longer fall under the letter of the law. In order to be convicted of tax fraud, the IRS must be able to prove that you intentionally employed illegal measures to avoid paying rightfully owed taxes.
The following actions are often used by individuals and corporations in an attempt to defraud the government out of tax revenue:
- Failing to file a tax return
- Intentionally underreporting or omitting income
- Claiming false deductions
- Hiding or transferring assets or income
- Overstating the amount of deductions
- Making false entries in records
- Failing to report income earned in a stock exchange
- Keeping two sets of books
- Misusing trusts
- Abusing charitable deductions
The federal government has established the Tax Whistleblower Program in order to provide an incentive to individuals with knowledge of large scale tax underpayment to come forward with their information. Whistleblowers may receive between 15% and 30% of all recovered taxes, penalties, and interest in cases where the government recovers more than $2 million. Becoming a tax whistleblower is an important public service since it can help the government recoup needed revenue that will eventually go to pay for important programs that benefit all citizens.
The attorneys at Kenney & McCafferty have been handling tax whistleblower claims for more than a decade. Our firm includes a former IRS Revenue Agent, Forensic Accountants, and a former Department of Justice tax prosecutor. We have the skills and experience necessary to assist the IRS throughout every stage of their investigation so that you can maximize your tax reward.
If you have knowledge of tax underpayment resulting in the underpayment of more than $2 million to the IRS, please contact our tax whistleblower attorneys today. Kenney & McCafferty will consult with you about your case, without obligation. All communications with Kenney & McCafferty attorneys regarding your case are confidential and protected by attorney-client privilege.
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Friday, September 10th, 2010
UBS whistleblower Bradley Birkenfeld’s testimony led to a $780 million settlement and recovery of thousands of questionable Swiss bank accounts, as well as exposing one of the largest tax evasion schemes in the history of international banking. Despite the great risks that Birkenfeld took in coming forward, the United States Department of Justice indicted him, sentencing the whistleblower to 40 months of prison time. In similar cases, most whistleblowers like Birkenfeld – even those partially complicit in the actions they were decrying – received the metaphorical “slap on the wrist” in the form of a fine or suspension of trading licenses. Why, then, considering Birkenfeld’s voluntary and extensive participation, is he currently sitting in a medium security Pennsylvania prison?
Attorneys can find it difficult to maneuver the client safely through situations like Birkenfeld’s. Experienced qui tam attorneys recognize that whistleblowers come upon fraud sometimes because the whistleblowers are involved, at least marginally, in the questionable activity themselves. Although Birkenfeld admitted his complicity in the fraud, he aroused the DOJ’s ire by failing to fully disclose his wrong-doings. The prosecutors discovered the extent of Birkenfeld’s complicity at different intervals throughout the case instead of receiving a full disclosure from Birkenfeld at the outset. The prosecuting attorneys felt betrayed by Birkenfeld’s failure to be completely candid during the initial debriefings and believed his initial interviews to contain material misrepresentations, whether by commission or omission. The lack of initial disclosure complicated the DOJ’s investigation, diminished Birkenfeld’s credibility as a witness, and placed Birkenfeld in the unenviable position of seeking leniency for substantial criminal conduct while making material misrepresentations to the government.
There are several simple lessons to be learned from the unfortunate Birkenfeld saga. First, as a whistleblower be prepared to be entirely truthful about your role in the conduct that you are exposing. Do not expect to pick and choose what you will reveal to the government. Second, fully disclose everything to your counsel so that he or she can determine what is relevant and needs to be disclosed to the government. Conversations with counsel are protected by the attorney client privilege so those disclosures can be made without fear of them being revealed without your approval. Third, hire counsel experienced in evaluating potential criminal and civil liability in tax matters. There are steps that can be taken to protect your interests even if potential criminal exposure exists for your conduct. Experienced counsel can explain your options and see that your interests are protected while pursuing your whistle blower claim.
When you consult whistleblower counsel, feel comfortable that Kenney & McCafferty can advise you no matter what your situation. Kenney & McCafferty possesses the necessary experience in both civil and criminal tax matters to safely navigate the whistleblower through the difficult process of reporting tax fraud.