In today’s Wall Street Journal article titled “Whistleblower Bounties Pose Challenges,” Jason Zuckerman, a principal at The Employment Law Group® law firm, states that the IRS “needs to be more responsive” to whistleblowers claims.  Zuckerman is referring to the IRS whistleblower program under which whistleblowers who report tax fraud can obtain a reward of up to 30 percent of any taxes collected as a result.  While the IRS’s whistleblower program has been largely touted as a success at generating quality leads, the IRS has yet to reward any of the hundreds of whistleblowers who provided the agency with the information.  For more information on reporting tax fraud, click here.

UBS has agreed to pay $780 million to settle allegations that it helped thousands of U.S. taxpayers defraud the Internal Revenue Service (“IRS”).  According to reports by the Department of Justice, UBS concealed billions of American dollars in accounts held overseas despite requirements to report IRS income and other identifying information for its U.S. clients to the IRS.  The U.S. Securities and Exchange Commission (“SEC”) also filed a complaint against the financial firm, alleging that UBS violated SEC rules by acting as an unregistered broker-dealer and investment advisor to thousands of U.S. citizens.  The settlement agreement includes payment for disgorgement, interest, penalties and restitution for unpaid taxes.  Other terms of the agreement include disclosure of the names of U.S. clients with UBS accounts.

This settlement is significant because it allows the U.S. government to pierce the veil of the Swiss bank secrecy and reminds companies that the penalties for participating in tax evasion schemes are severe.

The Employment Law Group® law firm routinely represents whistleblowers in disclosing federal tax fraud or underpayments.  For information about the IRS Whistleblower Reward Program, click here.

On June 2, 2008, the U.S. Tax Court proposed new rules for determining IRS whistleblower awards under section 7263.  The proposed rules grant the court jurisdiction over appeals of award determinations and include procedures for commencing a whistleblower award action.  

Among the proposed amendments are references to actions for redetermination of a whistleblower’s employment status, determination of relief from joint and several liability, and lien or levy, and authorization for electronic service.  The press release regarding the proposed amendments to the Tax Court’s Rules of Practice and Procedure is available here.

The Internal Revenue Service released new guidelines for whistleblowers to report tax fraud and possibly claim a reward based on the amount of additional tax, penalties and interest that is owed. Under the new procedures, the award for reporting tax fraud ranges from 15% to 30% of the collected proceeds. To be eligible for an award, the tax, penalties, interest, additions to tax, and additional amounts in dispute must exceed in the aggregate $2,000,000 and, if the allegedly noncompliant person is an individual, the individual’s gross income must exceed $200,000. The new guidelines are posted at http://www.irs.gov/pub/irs-drop/n-08-04.pdf.