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Posts Tagged ‘tax claims’
Tax Whistleblowers Must File within 30 Days of No Answer Letter
Tuesday, April 26th, 2011
In Friedland v Commissioner (T.C. Memo 2011-90), the United States Tax Court dismissed the IRS whistleblower’s appeal because it was not filed within thirty days of the date of the “no answer letter” sent to Friedland by the IRS Whistleblower Office. The Tax Court reiterated its ruling in Cooper – the “no answer letter” constitutes a final determination of a whistleblower claim.
Murray Friedland, a CPA, reported two corporations for tax violations in September 2009. On November 13, 2009, the IRS Whistleblower Office sent Friedland a letter explaining that it had reviewed and evaluated the claim and then said that prevailing law prevented it from explaining why a claim would be denied. Friedland found the letter confusing. He sent additional information about his claim to the Whistleblower Office, and he called for an explanation. The WO responded with three letters, one memorializing a conversation in which Friedland was told that he could write to the US Court of Federal Claims. The letters also confirmed that the WO would not change its determination about Friedland’s claim.
Friedland followed the suggestion of the WO and appealed to the Court of Federal Claims. The Court of Federal Claims dismissed the appeal on May 26, 2010, because the CFC does not have jurisdiction to hear IRS whistleblower appeals. On June 18, 2010, Friedland filed an appeal with the Tax Court.
Friedland filed his appeal 217 days after the date of the first letter, the “no answer letter.” As decided in previous Tax Court rulings, the “no answer letter” is notice of a final determination that the IRS is denying the claim. Whistleblowers have thirty days from the date of the no answer letter to file their appeals. Because Friedland filed 217 days after the date of the no answer letter, the Tax Court ruled that it had no jurisdiction over the claim because it was filed too late.
With regard to Friedland’s obvious confusion about the appeal process, the Tax Court said, “We recognize that petitioner may have relied on the erroneous advice of the Whistleblower Office in filing his initial appeal with the Claims Court. . . We sympathize with the petitioner. We cannot expand our jurisdiction, however, even where the Commissioner provided bad advice.”
Kenney & McCafferty, P.C., has successfully represented IRS whistleblowers, even before the passage of the 2006 whistleblower statute. For knowledgeable and trustworthy representation, contact K&M for a free assessment today.
Tags: Abusive Tax Shelters, Corporate Tax Fraud, Employment Tax Fraud, Estate Tax Fraud, fraud reward, IRS whistle blower, IRS whistleblower, offshore tax fraud, Tax cheat, tax claims, tax court, tax evasion, Tax Fraud, tax petition, tax underpayment, tax whistle blower, tax whistleblower, tax whistleblower petition, whistleblower appeals, whistleblower award, whistleblower reward
Posted in Abusive Tax Shelters, Corporate Tax Fraud, Employment Tax Fraud, Estate Tax Fraud, IRS Whistleblower Office, Money Laundering Tax Fraud, Offshore Accouts Fraud, retaliation, Tax Fraud, Uncategorized, Whistleblower Protection | Comments Off
IRS Proposes Changes to Whistleblower Reward Program
Wednesday, February 23rd, 2011
Better Incentives for Reporting Corporate Tax Fraud
Proponents of the IRS Whistleblower Program can encourage the IRS to adopt a change in an award calculation rule that could increase payments to whistleblowers who report corporate tax underpayments. On January 18, 2011, the Service published a revision to IRC Section 301.7623 that would expand the scope of “collected proceeds” to include “amounts collected prior to receipt of the information if the information provided results in a denial of a claim for refund that otherwise would have been paid; and a reduction of an overpayment credit balance used to satisfy a tax liability incurred because of the information provided.” Those interested in encouraging folks to report corporate tax fraud should write to the Service and ask that the definition be specified to include offsets against NOLs.
So…why the change?
The IRS issued its whistleblower manual in June 2010. The Service adopted a definition of “collected proceeds” that disallowed payments to whistleblowers when the defendant taxpayer satisfied the tax debt by reducing a previous tax credit balance. The new definition expands the term “collected proceeds” to include offsets against credit balances.
Here’s the problem. In the case of large corporations, the reference to “credit balance” is not generally used. Corporations either have a taxable balance, or they are in a Net Operating Loss (NOL) position in which case they don’t pay tax in the current tax period. Instead, the corporations apply a portion or all of the NOL balance to current period taxable income. In addition, corporate credit balances (NOLs) result from many reasons other than tax “overpayment.” For example, a corporation can achieve an NOL balance through the acquisition of another company – and not pay tax for that period.
To boil it down, a whistleblower reports that MegaCorp underpaid $ 100M in taxes for the year 2008. The IRS confirms that MegaCorp underpaid $ 100M in taxes for the year 2008. However, MegaCorp bought MiniCorp and incurred a NOL of $ 100M. MegaCorp says to the IRS, “Okay, just take the $ 100M from the NOL, and we’ll call it even.” The IRS says okay, and the whistleblower gets nothing. That is, nothing under the June 2010 Whistleblower Manual. And, unless NOL offsets are explicitly addressed in the new expanded definition of “collected proceeds,” whistleblowers could be denied rewards for NOL offsets because they are not technically “credit balances.”
Changing the definition of “collected proceeds” to specify inclusion of NOL offsets would incentivize whistleblowers to report tax fraud being committed by large corporations. The IRS is asking for public comment on the rule change. Those who want to comment on the change should send written comments to:
CC:PA:LPD:PR (REG-131151-10)
Room 5203
Internal Revenue Service
P.O. Box 7604
Ben Franklin Station
Washington, DC 20044
The IRS will consider timely submissions of written comments that include the original letter and eight copies. Submit your comments by April 1, 2011.
Tags: corporate fraud, fraud reward, internal revenue service, IRS, IRS whistleblower, tax claims, tax evasion, Tax Fraud, tax underpayment, tax whistleblower, whistle blowing, whistleblower award, whistleblowing, whistlebower reward
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Galileo – History's Greatest Whistleblower?
Tuesday, February 15th, 2011
Galileo faces the Inquisition
February 15, Galileo’s birthday, is a fitting time to reflect upon Galileo’s experience with blowing the whistle on the Ptolemaic theory, the long held belief that the Earth was the center of the universe and that the sun and the planets orbited the Earth. Galileo today is called “the father of modern observational astronomy” and “the father of modern physics.” Stephen Hawking stated, “Galileo, perhaps more than any other single person, was responsible for the birth of modern science.” Most people don’t realize that Galileo was tried by the Inquisition for his advocacy of Copernicanism, found guilty of heresy, and spent the rest of his life under house arrest.
As brilliant he was, Galileo did not understand the environment in which he was operating, and he failed to adhere to rules and constraints placed on those attempting to advance scientific theories in the 1600s. His support of heliocentrism offended the Catholic church. The church admonished Galileo, who thought he would be clever and work around the constraints that had been placed on him. After being chastised, Galileo waited years to publish Dialogue Concerning Two Chief World Systems, but he didn’t follow the rules. To publish, he needed papal permission and formal authorization from the Inquisition. He didn’t get them. Had he followed the rules, Galileo probably could have avoided trial and arrest. Instead, Galileo was:
* Found “vehemently suspect” of heresy.
* Sentenced to formal imprisonment, which was later commuted to house arrest.
* Had his publication, Dialogue, banned.
* Forbidden to ever publish again.
After his death, the world eventually lauded his contributions, but Galileo died without acclaim and in isolation.
Whistleblowers should learn from Galileo’s mistakes. No matter how brilliant a whistleblower may be, it is impossible for everyone to know everything. There is no substitute for experienced legal advice when one decides to blow the whistle. Galileo originally had many supporters who could have guided him the intricacies of the papacy’s rules for publication. He didn’t ask, and he thought he had the situation well in hand. He was wrong.
If Galileo could not figure out how to maneuver through the intricacies of successfully blowing the whistle, who can? Fortunately, whistleblowers today have Kenney & McCafferty to call for expert advice. Whistleblowers should educate themselves on the pros and cons before blowing the whistle. If you want to report fraud against the government, save yourself some headaches. Get a free consultation by calling Kenney & McCafferty today.
Tags: abuse, corporate fraud, corruption, ecurities violations, False Claims Act, FCA, fraud, fraud reward, government fraud, health care fraud, pharmaceutical fraud, Qui Tam, retaliate, retaliation, SEC whistleblower, tax claims, tax evasion, Tax Fraud, tax whistleblower, waste, whistle blower, whistle blowing, whistleblower, whistleblowing, wrongful termination
Posted in Abusive Tax Shelters, Corporate Tax Fraud, Employment Tax Fraud, False Claims Act, IRS Whistleblower Office, Money Laundering Tax Fraud, Offshore Accouts Fraud, retaliation, SEC Whistleblower Program, Tax Fraud, Uncategorized | Comments Off
Don’t File Your Tax Whistleblower Appeal in the Court of Federal Claims
Thursday, February 3rd, 2011
Even though the IRS advised tax whistleblowers up until January 2009 that they could file appeals of claim denials with the Court of Federal Claims, a whistleblower recently found out the hard way that the COFC would not hear the case. Despite sending the whistleblower a Letter 1010 telling him that COFC would hear some whistleblower appeals, the IRS moved that the court dismiss the case. COFC agreed with the IRS.
Claimant Robert Colman notified the IRS that Accountant Steven Krell embezzled funds from and filed false tax returns for Colman’s mother. In 2003, the IRS rejected Colman’s claim and told him he could appeal to the Court of Federal Claims. Colman learned Krell pled guilty to the filing of false tax returns in 2009. Colman filed in the Court of Federal Claims in April 2010 requesting 15 percent of whatever the Service recovered from Krell as a result of the tax action.
The IRS countered by pointing out that Section 7623(a) is not a money mandating statute. Section 7623(a) does not mandate tax whistleblower awards; 7623(b) does. Section 7623(a) covers claims that were made prior to the 2006 statute change that allowed whistleblowers to get awards if their claims met certain criteria. Today, it also includes those claims for awards that fail to meet statutory and agency threshold considerations.
The IRS also stated that COFC could not properly assert jurisdiction over the matter, despite its previous letter to Colman stating that the Court of Federal Claims was the appropriate forum for appeals. The Service stated that in 2003 the Service believed the COFC was the correct court for limited types of whistleblower appeals, but it learned subsequently that this was not true and Letter 1010 confused people with its COFC reference. The Service stopped using Letter 1010 in January 2009. The Court of Federal Claims expressed dismay that Colman wasted time and money by responding in conformity with the letter when he decided to appeal.
Despite its criticism of Letter 1010, the Court of Federal Claims sided with the IRS. Noting that parties cannot confer jurisdiction on a federal court simply by agreeing that a particular court should hear a particular matter, the court dismissed Colman’s case.
Tags: tax claims, Tax Fraud, whistleblower, whistleblower appeals
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