KenneyMcCaffertyTax
Posts Tagged ‘tax underpayment’
New York Sues Sprint for $300M Tax Fraud
Tuesday, April 24th, 2012
New York has filed suit against Sprint Nextel for more than $300 million. Attorney General Eric Schneiderman announced the “first-of-its-kind” lawsuit against the company for “deliberately under-collecting and underpaying millions of dollars in New York state and local taxes on flat-rate access charges for wireless calling plans.”
The complaint alleges underpayments of more than $100 million, costing the State nearly $210,000 per week.
The lawsuit is the first ever tax enforcement action filed under the New York False Claims Act. Twenty-nine states and the federal government have passed False Claims Acts, but only New York’s Act expressly covers tax fraud. Under the NYFCA, the Attorney General may seek triple damages, plus penalties and interest.
According to the complaint, beginning in 2005, Sprint, the third-largest U.S. mobile service provider, failed to collect and pay New York sales taxes on an arbitrarily set portion of its revenue from fixed monthly access charges. The scheme was a part of a nationwide effort by the company to obtain an advantage over its wireless competitors, all of which have complied with the “extremely clear and unambiguous” state tax law, according to Schneiderman. “Everyone else had no trouble figuring out what the tax law was – except Sprint.” In executing its fraudulent scheme, Sprint repeatedly and knowingly submitted false records and statements to New York State tax authorities.
“By deliberately evading sales tax, Sprint cost state and local governments over $100 million that could have been used for critical services and much needed resources that our state and its citizens need given the challenging economic times we are in,” said Schneiderman. The message of our office is clear – tax dodging is not acceptable and we will use every tool in our arsenal to make sure that taxpayers’ money is protected, and that honest businesses and consumers are not placed at a disadvantaged for collecting and paying their fair share of taxes.”
The State’s lawsuit was prompted by a whistleblower complaint from Empire State Ventures. As whistleblowers, they may be eligible to receive up to twenty-five percent of any money recovered by New York as a result of information they have provided.
In response to the lawsuit, Sprint issued a statement denying the allegations: “This complaint is without merit and Sprint categorically denies the complaint’s allegations.”
If you have knowledge of Tax Fraud and would like to discuss the possibility of a whistleblower award under the New York False Claims Act or the IRS whistleblower program, please contact our 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.
Tags: False Claims Act, New York False Claims Act, Sales tax, Tax Fraud, tax underpayment, whistleblower award
Posted in Corporate Tax Fraud, False Claims Act, Tax Fraud | Comments Off
K&M Presents Testimony on Whistleblower Program
Wednesday, May 18th, 2011
The IRS Building in Washington, D.C.
Linda Stengle of Kenney & McCafferty, P.C. presented testimony before the IRS on May 11, 2011, on its proposed definition of “collected proceeds.” The definition, if approved, would form the basis of calculating whistleblower awards.
The IRS had four people on a panel to hear the comments. They were Tom Kane, Senior Legal Counsel; Stephen Whitlock, Director of the Whistleblower Office; Alexandra Minkovich, Attorney-Advisor; and Kirsten Witter, Chief of the Service’s Ethics and General Government Law Branch. The panel asked questions of a few presenters, including Stengle. Tom Kane stated that NOLs should be considered to be ordinary deductions and were not relevant to an award calculation. Kane also said there should be no 2 year waiting period imposed in cases involving a closing agreement and that further guidance would be issued with regard to whether whistleblowers can obtain a portion of criminal fines.
Stengle pointed out irregularities in the public comment process ordinarily required when the IRS changes a major regulation. Specifically, the IRS issued its Whistleblower Manual in June 2010 without public comment and narrowed the definition of “collected proceeds.” Senator Grassley, the author of the statute mandating IRS whistleblower awards, criticized the Manual and said that several sections worked to deter whistleblowers from reporting large scale tax underpayment. Stengle echoed Grassley’s request that the manual be held in abeyance while substantive sections undergo public comment.
Four other attorneys presented testimony on the topic. Among other comments, Richard Rubin observed that the proposed rule addressed the inclusion of specific categories of recovery into the definition, but no actual definition for “collected proceeds” exists anywhere in the regulations.
All those who presented stated that the proposed definition for collected proceeds needed to be broadened. The panel members gave no indication of when the IRS plans to publish the final version of the definition.
Tags: corporate fraud, government fraud, IRS, IRS reward, IRS whistleblower program, tax evasion, Tax Fraud, tax underpayment, tax whistleblower, 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, Tax Fraud, Uncategorized, Whistleblower Protection | Comments Off
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 Goes Viral?
Thursday, April 14th, 2011
One of many IRS YouTube offerings.
Not exactly, but the IRS has introduced its own YouTube channel, along with an array of audio products to help taxpayers take advantage of tax benefits available in the American Recovery and Reinvestment Act. People can visit the site at www.youtube.com/irsvideos. The IRS YouTube channel caters to people of different backgrounds by offering videos in English, Spanish, and American Sign Language.
One video teaches viewers how to use the IRS Withholding Calculator. The IRS suggests that people who have more than one job or working spouses should especially check their withholding to ensure neither too much nor too little is being withheld. People can use the calculator to help determine if they should make adjustments. Another video of interest discusses the role of an interim appeals office and what taxpayers can expect from that office.
In another attempt to make the tax code more transparent to today’s filers, the IRS has also launched an ITunes podcast site featuring information about ARRA tax credits.
Unfortunately, the IRS tax whistleblower program has not been the subject of a YouTube video, at least not one produced by the IRS. However, interested tax fraud followers can go to YouTube and type in “irs whistleblower.” One of the results listed will be a video of an IRS Whistleblower Conference panel discussion starring K&M’s lead partner Brian Kenney.
Of course, if you would like to learn more about the IRS whistleblower program, there’s no need to look at YouTube at all. Call Kenney & McCafferty at 215-367-4333 for a free consult today.
Tags: corporate fraud, government fraud, IRS, IRS reward, IRS whistleblower program, tax evasion, Tax Fraud, tax underpayment, tax whistleblower, 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, Tax Fraud, Uncategorized | Comments Off
IRS To Hold Hearing on Definition of Collected Proceeds
Monday, April 4th, 2011
The IRS Should Target Large Corporations for Tax Fraud
The IRS has set May 11, 2011, as the hearing date for public comment on proposed regulations REG-131151-10 on the payment of rewards for whistleblowers. Chief among the areas of interest is the new definition of “collected proceeds.”
The proposed regulations do not make it clear whether corporations alleging a Net Operating Loss that is reduced by whistleblower information would result in an award for the whistleblower. Large corporations routinely rely on highly sophisticated tax experts to help them reduce their cash tax liability. The IRS’s proposed change in definition of “collected proceeds” appears to target individual taxpayers but fails to clearly identify large corporations who evade taxes. Tax underpayment by corporations, not individuals, should be the focus of the IRS. Corporations represent the greatest opportunity to capture much needed tax dollars for the US Treasury. Those blowing the whistle on large corporations should be incentivized to the same extent as those blowing the whistle on an individual taxpayer.
People who want to present oral comments at the hearing must submit a written outline of their comments to the IRS by April 19th. Each speaker will be allotted 10 minutes. The hearing will be held at the Internal Revenue Building at 1111 Constitution Avenue, NW, in Washington, D.C.
Tags: corporate fraud, government fraud, IRS, IRS reward, IRS whistleblower program, tax evasion, Tax Fraud, tax underpayment, tax whistleblower, whistleblower award, whistleblower reward
Posted in Abusive Tax Shelters, Corporate Tax Fraud, IRS Whistleblower Office, Money Laundering Tax Fraud, Offshore Accouts Fraud, Tax Fraud, Uncategorized | 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
Posted in Uncategorized | Comments Off
