To maximize profits, businesses minimize tax liability. When they pay less, this hurts all taxpayers. The Internal Revenue Service (IRS) instituted a strong whistleblower reward program to ensure that wealthy taxpayers pay the amount they owe.
Above all, under this program, a person who reports serious tax underpayments to the IRS could receive a significant percentage of the amount the IRS recovers from the taxpayer.
About Tax Fraud
Surprisingly, the noncompliance rate for paying owed taxes is 17%. This means that around 1 in 6 is guilty of tax evasion. The Treasury Inspector General for Tax Administration (TIGTA) reported that, in 2006 alone, this rate of tax payment noncompliance meant that roughly $450 billion was underpaid.
Undeniably, Tax Fraud can happen in a variety of ways. The most common ones are Transfer Pricing Fraud, Foreign Tax Credit Fraud, and False and Material Misstatements
Transfer Pricing Fraud
Transfer pricing is vital to every corporation operating in a global market. When an organization sets a price for a good or service to be sold within a company, this is transfer pricing. These prices should reflect the realities of market conditions. They should be fair. This fairness plays a vital role in the overall accounting of large corporations. Companies manipulate these prices to avoid taxes. They will shift profits to lower tax areas.
For example, in 2006, GlaxoSmithKline paid over $3 billion to resolve IRS allegations of transfer pricing fraud.
Therefore, whistleblowers with information regarding companies engaged in transfer pricing fraud are encouraged to report to the IRS Whistleblower Office. If one reports such fraud with the help of qualified IRS whistleblower attorneys, the whistleblower may remain anonymous.
Foreign Tax Credit Fraud
The IRS law allows companies to deduct from their taxes when they also pay foreign ones. However, foreign tax credit law is complex. If an organization improperly claims these foreign tax law credits, it lowers the taxes paid to the United States.
False and Material Misstatements
Companies use false and material misstatements or omissions in tax filings to unlawfully avoid paying taxes. This kind of fraud can take many forms. These are from improperly labeling company expenditures to reduce taxable income to misstatements of income and improper classification of executive compensation. Moreover, companies often misreport income and other information in an effort to avoid taxation.
Other Forms of Tax Fraud
Besides the ones previously listed, these are other fraudulent schemes the IRS uncovers every year.
- Tax return falsification
- Income deferral or misrepresentation
- Misrepresented or overstated deductions
- Employee leasing schemes or paying employees in cash
- Misrepresentation of transfer pricing data
- Accounting fraud
- Securities fraud
- Improper tax credit usage
- Abusive advance fee or royalty payments
- Money laundering
- Abusive tax shelters or illegal tax shelters
- Abusing foreign tax credits
- Foreign jurisdiction “loophole” schemes
- Evading motor fuel excise taxes
- Improper or fraudulent property valuations
Tax Fraud & Whistleblowers
Federal tax fraud cases are not handled under the False Claims Act (FCA). However, the compensation for a whistleblower that brings a successful case is modeled on the FCA: 15 to 30 percent of the total amount collected will be awarded to the whistleblower. Congress changed the Internal Revenue Code in 2006 to provide these incentives for reporting tax fraud. Interestingly, if a whistleblower does not like their award, they can challenge the amount they received. Before 2006, whistleblowers did not usually receive substantial awards, and the awards were not appealable.
In 2016, the Whistleblower Office in the IRS made 418 awards, totaling about $61 million — a 322% increase from those paid in 2015. The number of claims rose too, about 6.4% since 2015. Case closures of whistleblower cases went up 99%.
The IRS paid over $100 million in 2015 to whistleblowers.
The Law Protects and Rewards a Whistleblower
When a knowledgeable attorney like those found at The Michael Brady Lynch Firm files a False Claims Act lawsuit, he or she files it under a seal. This means it is completely confidential. There is also a full disclosure statement in the suit, which details the evidence collected by a whistleblower.
After we file your suit, the Department of Justice will review the evidence before deciding to step in and decide if they want to prosecute the case. The government’s fraud investigator will work closely with you, the whistleblower to identify all responsible for the fraud.
The IRS could give you to 15-30% of the funds recovered. In order to receive the reward, you must be the first one to file a case under the False Claims Act. This is why it is key to pick an experienced attorney to work quickly get your compensation.
Premier Complex Litigation Attorneys
The Michael Brady Lynch Firm has successfully represented thousands of consumers and recovered millions of dollars for their clients. Our team of attorneys have been recognized as some of the most experienced and successful in the country. Our award-winning staff is also sought after for our knowledge on complex litigation, scientific evidence development, negotiation strategies and trial tactics.
Most of all, our law office is resourceful and dedicated to pursuing any compensation you are due. Because of this, we have received a high degree of peer recognition and professional achievement, such as inclusion on numerous Plaintiff Steering Committees. We will take whatever legal measures are necessary when fighting for your rights to damages.
Therefore, if you believe you have uncovered evidence of fraud involving a government-funded program, contact us today. Our attorneys have represented many clients in the past with complex cases. We will work tirelessly to obtain results on your behalf.