Tax Fraud
“Any one may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one's taxes.” -Hon. Learned Hand in his opinion in Gregory v. Helvering, 69 F.2d 809, 810 (2d Cir. 1934)
Business and individuals have often repeated this quote and even more have been inspired by its spirit since Judge Hand delivered that famous opinion. While taxpayers can certainly take measures and engage in planning to minimize their tax liabilities and increase tax efficiency, they must do so lawfully and responsibly.
Unfortunately, many taxpayers—particularly those engaged in cross-border business—attempt to use international business operations, related party transactions, trademark and brand licenses, technology licenses, and other methods in order to unlawfully avoid the payment of federal income tax. The Internal Revenue Service (“IRS”) has created a whistleblower reward program to help ensure that taxpayers pay their lawfully owed federal taxes. A person who reports serious tax underpayments to the IRS can be eligible to receive an award of 15% to 30% of the amount the IRS recovers from the taxpayer.
About the IRS Whistleblower Program
In order to qualify for the program, the total underpaid tax liability must exceed $2 million, including interest and penalties. A whistleblower who participated in tax fraud who then report it to the IRS may still be eligible for an award if they did not plan and initiate the fraud and are not convicted in a criminal proceeding related to the underpayment.
Qualifying for a Reward
- Whistleblowers must provide relevant information to the IRS whistleblower office using IRS Form 211;
- The reported fraud must not have been previously reported;
- The information provided by the whistleblower must have been actually used to prosecute or settle the tax fraud; and
- The whistleblower makes the report within three years of the filing of the incorrect tax return, or six years if the tax return understates income by at least 25%. There are no time limit on claims where a false tax return was filed with the intent to commit tax evasion.
It is therefore important that the information you provide be a specific and as detailed as possible. Documentary evidence is also crucial. Narrative descriptions of tax fraud schemes are unlikely to be taken forward by the IRS and would not in and of itself be sufficiently actionable for use in prosecution or settlement by the IRS.
Confidentiality
As with other whistleblower programs such as the Dodd-Frank whistleblower provisions administered by the SEC, the IRS whistleblower office will strive to protect the whistleblower’s identity to the maximum extent permitted by law. However, criminal prosecution of the taxpayer that may have unlawfully avoided tax may require that the whistleblower offer testimony and therefore break their anonymity.
We are pleased to act for whistleblowers that have information regarding tax fraud that involves the areas of international corporate tax with which we have extensive experience gained over two decades in this technical area of law. These schemes typically involve:
- Overseas subsidiaries
- Distorted pricing amongst related companies
- Royalty payments for the licensing of intangibles such as trademarks, technology, or other know-how
- Double invoicing
- Maintaining multiple sets of corporate financial records
- Undisclosed shareholdings
These are merely a few common tax fraud schemes that taxpayers involved in international and cross-border business operations may engage.
It is important to seek a qualified attorney as early as possible if you considering reporting tax fraud. Ensuring you are not in legal jeopardy yourself, protecting your anonymity, and giving your case the best possible chance to be taken up by the IRS are some of the most important factors to consider.
We have decades of experience in international tax and supply chain structuring, related party transfer pricing, royalty and license agreement structuring and tax planning for global business. We have deep experience in Asia, we have seen the red flags to watch for that often indicate the existence of double invoicing schemes, multiple sets of financial records, unreconciled related party invoices, and other common international tax fraud exposures.
In order to maximize your chances of qualifying for an IRS whistleblower reward, seek an attorney that can assist you in building up the case with appropriate evidence and sufficient specificity. Our Team have a unique capability to understand this area of law and the global business context in which these schemes arise.
We are always ready to help you and discuss your potential case. Complete the online form or call us at +1 (614) 641-8792 now to schedule a free appointment with our principal attorney.
