Posts Tagged ‘whistleblower rewards’

Tax Roundup, 2/14/2013: Happy Valentine’s Day! Oh, and tell me more about your illegal tax shelter, honey!

Thursday, February 14th, 2013 by Joe Kristan
Wikipedia image

Wikipedia image

The TaxProf Reports: IRS Whistleblower Office Issues Annual Report to Congress.  It looks like ratting out tax cheats could be lucrative.  Changes requiring the IRS to issue more awards were enacted in 2006, and it appears that the whistleblowers have done well.  In 2012, for example, 128 awards were paid totalling $125,355,799, according to the report.  That works out to nearly $1 million each.

Awards may well be one of the most effective ways to enforce the tax law, as well as one of the most creepy.  They make every disaffected employee a potential IRS mole.  Sure, it may make employment awkward for the whistleblower, but $1 million cash can be very consoling.

But before you go racing to the IRS, consider this sobering news from the report: From 2008 through 2012, whistleblowers reported 33,064 cases to the IRS, but awards were paid only 630 times.  That means about 1 in 50 claims cashed out.  Because the IRS collection process is slow, some more of those claims will get paid out, but the great majority won’t.

The moral?  If you have a Valentines Day date, be careful how much of your tax life you share.  Love is one thing, but cold hard cash is something else entirely.

 

I’ll start that diet right after I finish this cheesecake:

Treasury nominee Lew calls tax reform top priority (Reuters)

Obama Proposes Tax Incentives for Manufacturing (Tax Analysts, $link)

If tax reform is a top priority, you don’t start the process by adding more gimmicks to the code.

 

You mean not all appraisals are trustworthy?  Ohio Federal Court Bars  Appraiser of Historic-Preservation Easements. From a Department of Justice press release:

A federal court in Cleveland has barred MAI-designated real estate appraiser Michael Ehrmann and his firm, Jefferson & Lee Appraisals Inc., from preparing property appraisals for federal tax purposes, the Justice Department announced today. Judge Dan Aaron Polster of the U.S. District Court for the Northern District of Ohio signed the civil injunction order against Ehrmann and Jefferson & Lee Appraisals. The defendants consented to the injunction without admitting the allegations against them. 

Federal law allows a taxpayer in certain limited circumstances to claim a charitable deduction for the value of a conservation easement donated to a qualified organization. The easement’s value must be determined by a qualified appraiser. According to the government complaint, Ehrmann’s appraisals repeatedly overstated the value of conservation easements placed on historic properties, including the Book Cadillac Hotel in Detroit and the Powerhouse Building in the Flats District of Cleveland.

The tax law is very touchy about the rules for appraisals.  The obvious potential for abuse shows why.

 

A sad story from Buffalo.  A tax preparer scammed his own clients, reports buffalonews.com:

Elizabeth Wopperer lost everything. She lost her business. She lost $40,000 in cash. And by the time it was all over, she found herself filing for bankruptcy.

On top of all that, the IRS now wants the money that was stolen from her.

The man she blames is going to federal prison for up to 30 months, but that won’t return the cleaning business she was forced to sell or pay the taxes she now owes because of his fraudulent actions.

What happened?

Mangione, the operator of a North Tonawanda payroll and tax preparation business, was supposed to pay federal income taxes on behalf of his clients but didn’t.

He chose instead to pocket some of the money, which means Schunke, Wopperer and several others are still on the hook for those taxes.

There’s no reason to give money to your preparer to pay your taxes.

 

Gene Steurle, Why Tax and Transfer Programs Often Discourage Work and Savings (TaxVox):

 The tax code also is loaded with disincentives to work, save, and study.  They include PEP and Pease (reductions in tax allowances for personal exemptions and itemized deductions), child tax credits, and the earned income tax credit. These implicit taxes combine with explicit taxes to create incentives for many households that are often inefficient and inequitable, to say nothing of strange and anomalous.

That’s why proposals to increase the earned-income credit are pernicious.  The phase-outs of the benefits as incomes rise punish taxpayers for improving their lot.

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But I thought nobody moved because of state taxes! Two Dozen Companies Announce California Departures, Citing Higher Taxes (Joseph Henchman, Tax Policy Blog).

Cara Griffith, Income Redistribution Has No Place in State Tax Systems(Tax.com) The goal of taxes should be to finance operation of the government.  The tax commissioner is not Handicapper General.  When states try to soak the rich, they’ll rinse them right across the state line.

 

Kay Bell, Mistakes on child tax credit form are delaying some returns

Paul Neiffer, Don’t Forget the “Magic Blurb” on Donation Acknowledgements!  A cancelled check by itself doesn’t get you a charitable deduction over $250.

Missouri Tax Guy, Maximize your Travel & Entertainment Benefits.

TaxGrrrl, The Cost Of Health Care Insurance, Taxes and Your W-2

Patrick Temple-West,  Vital New York City property taxes lost, and more (Tax Break)

Andrew Mitchel, 48% Decrease in Number of Expatriates for 2012

Jack Townsend,  Interview of R. J. Ruble, A Tax Lawyer Incarcerated for Tax Shelter Crimes.  Sobering.

 

Say, what time is it?  Madness Time. (Christopher Bergin, Tax.com)

If you are thinking of proposing tonight, check out An Updated Marriage Bonus and Penalty Calculator for Valentine’s Day from Roberton Williams at TaxVox before you commit!

News you can use. The SEC is Developing an Army of Robots to Replace You (Going Concern)

 

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30 pieces of silver or 30 percent of the gross

Monday, October 5th, 2009 by Joe Kristan

The new IRS program that pays whisleblowers rewards up to 30 percent of additional taxes collected is getting lots of new business, according to the IRS.
The TaxGrrrl ponders whether that’s a good thing. Senator Grassley thinks so. Peter Pappas also has some thoughts.
The program hugely increases the risks to clients and firms of engaging in evasion. A lot of the tax shelter cases involved tens of millions in taxes at the individual level, and even more when corporations were involved. A low-level staff accountant who sniffs out a bad deal might find 30 percent of that adequate compensation for giving up a dream of CPA glory.
While there is always something creepy about the IRS being able to horn in on confidential client-professional relationships, the professionals haven’t exactly been models of virtue during the past decade’s tax shelter debacles.

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Accountants, be nice to your staff…

Tuesday, August 25th, 2009 by Joe Kristan

…or they could cause you more headaches than you can imagine. Headaches like this:

A prominent Bay Area accounting firm might have some serious explaining to do, according to a $5 million suit filed by a former employee.
The suit charges San Francisco’s Shea Labagh Dobberstein of “violating their legal duties” in connection with tax returns the firm had prepared on behalf of two of its corporate clients. One of them allegedly had engaged in “intentional tax fraud,” the other in a “substantial understatement of (its) tax liability,” according to court papers.
Both were known, or became known, to the firm’s principals, who signed off on the returns anyway, the suit states. For blowing the whistle, tax accountant Gary Winston says he was fired, or, in legal parlance, subject to “wrongful termination in violation of public policy.”

It’s not clear from the article whether the ‘whistleblowing” involved the IRS whistleblower program, which can reward snitches up to 30% of taxes collected as a result of the information provided to the IRS.
If the plaintiff collected an IRS reward, the lawsuit seems a stretch. Potential whistleblowers have to weigh a tradeoff: it’s asking a lot of your employer to keep you on the job after you’ve sold your partners and clients to the IRS, and it’s not likely another firm will be eager to take you on. If you can collect 30% of a $10 million underpayment, though, you just might be willing to give up that public accounting career.
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I VACATIONED, BUT THEY DIDN’T

Monday, July 28th, 2008 by Joe Kristan

While the Tax Update took a brief vacation, tax charlatans and Congress (but I repeat myself) didn’t. Congress passed a misguided and futile housing relief bill full of tax favors to special interests disguised as help for you. I will work on a more complete discussion of the bill, which the President is expected to sign, but Kay Bell already has posted her summary. It’s “bipartisan,” which means we’re all screwed regardless of party affiliation.
There was quite a bit of private sector tax fraud news, highlighted by the opening of the tax evasion trial of “Girls Gone Wild” mogul Joe Francis. He’s represented by Robert Bernhoft, the former tax protester who pulled a rabbit out of his hat and got Wesley Snipes off on misdemeanor charges. He is reportedly alleging that he’s only being prosecuted because The Man disapproves of his naughty videos. In an interesting sidelight, he is suing a former bookkeeper for allegedly blowing the whistle on him under the new whistleblower rewards program (via Taxguru.net). I think this whistleblower program is going to have a huge effect on the risks of committing tax fraud, and ib the relationship between accountants and bookkeepers and their clients/employers. This case may open some eyes on that score.

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