Wednesday, December 31, 2008
"Of particular interest is whether Mr. Madoff and some of his investors used funds based in offshore tax havens to evade American taxes, according to a person briefed on the investigation," the Times said.
"Also under scrutiny is whether certain charities invested with Mr. Madoff had improperly allowed their donors to shift money offshore, and whether foreign banks had withheld American taxes on Madoff accounts, as required by the Internal Revenue Service, according to this person, who was given anonymity because of the delicate nature of the investigation."
See "Madoff Spotlight Turns to Role of Offshore Funds."
Monday, December 22, 2008
Prosecutors said the tax manager, Mark Muntean, knew the tax credit was improper, but Muntean's lawyer said his client relied on subordinates, who failed to give him all necessary information.
See "Ex-Bechtel lawyer acquitted in tax-credit prosecution."
One tax attorney said, "We've been dealing with these personal shelters for a decade now, and the new wave appears to be through foreign bank accounts, where major financial institutions have potentially facilitated the sheltering."
See "KPMG tax-shelter case is mixed-win for U.S."
Thursday, December 18, 2008
The government's high-profile case suffered many setbacks, including the judge's decision in 2006 to throw out charges against 13 other defendants because the government had applied pressure to KPMG to stop paying their legal bills.
KPMG settled with the government for $456 million in 2005.
See "Former KPMG executives convicted of tax evasion."
Tuesday, December 9, 2008
"U.S.-based corporations more than tripled their foreign profits between 1994 and 2004, rising from $89 billion to $298 billion – with 58 percent of that profit earned in low tax or no tax jurisdiction.
And this gives pause to some U.S. taxpayers and policymakers who want to be sure that that these corporations are paying their fair share at home."
"In the corporate arena, we’re starting to make progress in our international efforts by focusing on three specific areas which are most on our minds these days and which I believe will best assist our efforts to reign in those corporations who are pushing the envelope and also to help those corporations who play by the rules. First is Transfer Pricing"
"The second big area is hybrid structures.""Third and lastly are withholding taxes."
"Let me also point out that this past September, the Senate Permanent Subcommittee on Investigations held a hearing looking into how the IRS has been investigating certain investment banks who have been trying to help their clients – mostly hedge funds – avoid dividend withholding tax. During the hearing, there was also extensive discussion about securities lending transactions and Notice 97-66. Let me bring you up to date on the issue.
IRS is reviewing the notice. However, in the interim, we’re examining very carefully those transactions whose primary purpose is to avoid dividend withholding tax and will propose adjustments as needed."
Monday, November 24, 2008
"The developments amount to a coup for U.S. authorities, who have spent the past two decades trying to crack offshore banking markets with only incremental progress," the newspaper said.
At the same time, the Journal said, the IRS is considering a national settlement for the estimated 20,000 taxpayers that worked with UBS to avoid taxes. The settlement reportedly would be based on a 2003 landmark offshore credit-card and tax-fraud deal but with stiffer penalties.
See "UBS clients seek amnesty on U.S. taxes."
Friday, November 14, 2008
Cross-border financing transactions allow companies with overseas subsidiaries to pay foreign taxes, receive a U.S. credit for paying those taxes and then effectively split the credit with foreign lenders which in turn lower their interest costs.
The IRS position is that foreign tax credits shouldn't be allowed for those transactions because the U.S. would effectively be subsidizing the lending of foreign banks since the U.S. company and the foreign bank share the tax break.
In addition, AIG said it had settled a tax dispute related to "lease-in lease-out" tax shelters and anticipated recording an after-tax charge of between $34 million and $100 million in the fourth quarter of this year.
Thursday, November 13, 2008
The information about tax rates was included in a broader IRS study that examines the gap between income reported to shareholders and the consistently lower income reported to tax authorities, which was published by IRS researchers in the trade journal, Tax Notes.
The indictment against Raoul Weil was filed in U.S. District Court in Fort Lauderdale, Fla. The Wall Street Journal called it "the latest U.S. move aimed at pressuring Swiss banking officials to reveal the names of their American account holders." See "Top banker cited in tax-dodge case."
For more information see:
- "Swiss bank executive charged with aiding U.S. taxpayers evade income tax" (U.S. Department of Justice press release)
- "UBS executive indicted in U.S. inquiry" (The New York Times)
- "Top UBS executive indicted in Florida," (The Washington Post)
- "UBS shares drop after U.S. indicts top banker" (Reuters)
Thursday, October 2, 2008
The indictment said one way Castroneves-- a U.S. resident who achieved additional celebrity by winning the champion title in the 2007 season of the TV show, "Dancing with the Stars" -- had hidden income was by creating an offshore Panamanian shell corporation.
For details about the alleged income tax fraud scheme, see the Justice Department press release.
The company official, Michael A. Vallone, and five co-defendants were convicted in May of participating in a nearly decade-long scheme to divert income from businesses into sham trusts for clients, hiding hundreds of millions of dollars in income for those clients and resulting in a $60 million tax loss to the United States. The government said the case is one of the largest of its kind.
Thursday, September 11, 2008
The lawyer, Peter Cinquegrani, admitted in court that he had helped submit to the Internal Revenue Service false documentation about the tax shelters and taken other steps to support the tax evasion scheme.
At the same time, the IRS announced it had reached a settlement with Arnold & Porter related to charges that the law firm had failed to comply with tax shelter organization requirements and that it had marketed fraudulent tax shelters to clients.
Monday, September 8, 2008
The Whistleblower Office so far has pursued 80 "high-value" cases out of those whistleblower claims, the trade publication says.
The Tax Notes Today article (subscription required) explores the reason for the skyrocketing number of whistleblower reports. It also examines the tax evasion and tax fraud case against Joseph Francis, whose company was behind the "Girls Gone Wild" videos. His former accountant blew the whistle on him with the IRS.
Wednesday, August 13, 2008
The report, requested by the U.S. Senate Finance Committee, is entitled, "U.S. Multinational Corporations: Effective Tax Rates Are Correlated with Where Income Is Reported."
"The average U.S. effective tax rate on the domestic income of large corporations with positive domestic income in 2004 was an estimated 25.2 percent," according to the GAO.
"This is a reminder that the reporting is a broken system as far as corporations are reporting one set to the tax authorities and another to the capital markets," Mihir Desai, a Harvard Business School professor, told The Wall Street Journal.
Friday, August 8, 2008
"Other governments elsewhere are beginning to recognize the value of paying an insider for information about tax evasion," she says. She noted that Germany and Great Britain both paid a former employee of a Liechtenstein bank for information about their citizens who held secret accounts at the bank to avoid taxes.
"Such payments make sound business sense when considering that already more than €110 million has been recovered as a result of this inside information," said Kelton, who represents whistleblowers with information about federal tax violations under the new IRS whistleblower program.
Friday, July 18, 2008
"To be included, an individual had to be convicted of tax evasion, or had to accept responsibility for the charges levied against him (as former Samsung Group Chairman Lee Kun-Hee did in April when he was indicted on charges of tax evasion and breach of trust)," says the article.
At a hearing before the Senate permanent subcommittee on investigations, subcommittee members said they probably would consider legislation to deal with the problem of tax evasion through off-shore tax havens.
To read published accounts of the hearing, see Reuters, The New York Times or The Wall Street Journal.
Thursday, July 17, 2008
The report, by the Senate Permanent Subcommittee on Investigation, describes how Swiss bank UBS and LGT, owned by the royal family of Liechtenstein, helped wealthy individuals avoid U.S. taxes. It examines the practices of eight rich individuals in particular.
For news accounts about the report, see The Wall Street Journal and The New York Times.
Tuesday, July 15, 2008
If they are, the newspaper said, the new rules will require banks to notify the IRS and withhold taxes on dividends in that account.
"These new rules, which are aimed at United States, not foreign, clients of the banks, would help to peel back some of the layers of banking secrecy that permeate tax havens from Switzerland to the Caribbean, where vast sums of money are hidden from the I.R.S.," according to the Times.
Tuesday, July 8, 2008
"Offshore Alert" says that the former partner also is suing the banker, John Mathewson, over a business disagreement.
A government case against Mathewson in 1999 resulted in the banker providing the IRS with extensive information about off-shore tax havens in the Caribbean. A federal prosecutor at the time called him "the most singularly important government co-operator in tax haven prosecutions in the history of the Internal Revenue Service.”
Wednesday, June 25, 2008
"Despite operating hundreds of thousands of square feet of distribution facilities in the eight states, Amazon says it doesn't have any presence in them," the column says. "The company argues that it doesn't operate the plants, its wholly owned subsidiaries do."
Online retailers don't have to collect sales tax except where they have a physical presence. Texas is reviewing Amazon's position, the Journal says.
Wednesday, June 4, 2008
The Journal's Tax Report surmises that:
Many investors battling the Internal Revenue Service in high-stakes tax-shelter cases may take some hope from the government's defeat . . . . But IRS lawyers view the decision as merely a temporary setback on the road to annihilating the badly battered shelter business. Indeed, the government has won most recent cases involving shelters.One lawyer predicted the court decision in the tax shelter case would be reversed on appeal.
Friday, May 30, 2008
He is expected to provide the government with the names of his U.S. clients.
"UBS frequently teamed up with bankers in the tiny neighboring tax haven of Liechtenstein to help wealthy Americans hide assets from the Internal Revenue Service," the Wall Street Journal said.
The Journal said Newell sold accounts receivable at a discount beginning in 2001 to a newly created overseas company funded by Rabobank, a Dutch bank. Newell took a tax deduction for the discount.
"As long as Newell didn't control the overseas company, any cash left over after paying Rabobank wasn't taxed in the U.S. Newell says Rabobank controlled the entity," according to the Journal.
A former Rabobank executive reported the tax fraud to the IRS last year and may be eligible for a reward under the new tax fraud whistleblower law if the IRS recovers any funds.
Wednesday, May 28, 2008
"The new taxes are included in legislation providing tax benefits for soldiers and military veterans and will apply only to those who renounce their citizenship after President Bush signs the bill into law, as he is widely expected to do," the Wall Street Journal reported.
The new law applies only to those whose assets are worth more than $2 million.
The column notes that "smaller firms, independent CPAs, lawyers and insurance salesmen continue to flog new—and old—shelter mutations to business owners and the successfully self-employed."
“After all the enforcement, I’m surprised at the level of tax shelter activity that’s still out there,” says Ian Comisky, a partner at Blank Rome in Philadelphia who defends taxpayers in civil and criminal cases.
Monday, May 26, 2008
"In a ruling last December that sent tremors through the not-for-profit world, the Minnesota Supreme Court said a small nonprofit day care agency here had to pay property taxes because, in essence, it gave nothing away," the Times reported.
This also has repercussions for hospitals as far as providing charity care and universities regarding whether they provide enough financial aid.
Wednesday, May 21, 2008
Lawyers advising tax dodgers are saying their clients are struggling to decide among several alternatives. They can confess and plead for mercy. They can quietly file amended tax returns, pay up, make other required disclosures and hope overworked government prosecutors won't follow up. Or they could choose to do nothing and pray their names won't turn up.
The recently adopted law that increases the reward for whistleblowers who provide specific information to the Internal Revenue Service about tax avoidance schemes is encouraging whistleblowers to come forward.
Friday, May 9, 2008
The tax court decision involved the so-called "Kersting tax shelter project," in which 1,300 taxpayers signed agreements to be bound the outcome of a test case regarding the tax shelter. However, the agency's attorneys made a secret settlement with the defendants, then tried the case anyway without informing the court or other participants in the agreement.
The defendants lost the trial, and the other tax violators were bound by the results. They didn't learn of the secret settlement until later, then argued that the less harsh settlement terms should apply to them, also. The tax court agreed.
"The fraud on the court committed by [IRS] attorneys in the test case proceedings constituted fraud on the court in every case bound by the outcome of the test cases and harmed the integrity of the judicial process, not only as the test case procedure was employed in the Kersting project cases, but also as it might be employed in the future," the tax court said.
The judge ordered the IRS to adjust the accounts of all the taxpayers in the Kersting project.
WebCPA.com opined, "While the government is determined to cut down on the abuse of tax shelters, it needs to be careful not to overreach by allowing its attorneys to cut secret side deals that benefit one set of defendants while punishing a much larger set."
Friday, April 25, 2008
A jury found Snipes guilty earlier this year of three misdemeanor counts of willfully failing to file tax returns, but acquitted him of tax fraud and other charges. Two co-defendants, Eddie Ray Kahn and Douglas Rosile, were convicted on felony charges.
Judge Hodges sentenced Kahn to 10 years and Rosile to four and a half years.
Mr. Snipes was a member of American Rights Litigators, an organization founded by Kahn. Prosecutors have described that organization and its successor company, Guiding Light of God Ministries, as illegal tax-evasion schemes.
Before he was sentenced, Snipes offered the court checks totaling $5 million. The judge and the prosecutors declined to accept them, but an Internal Revenue Service employee eventually accepted them.
Tuesday, March 25, 2008
The list also noted other areas of IRS concern, such as the mis-use of tax-exempt organizations to shield income or assets from taxation and the misuse of trusts to reduce taxes.
“There is no secret formula that can eliminate a person’s tax obligations, " said Acting IRS Commissioner Linda Stiff in a statement. "People should be wary of anyone peddling any of these scams.”
Thursday, March 13, 2008
The men are thought to have acted independently of each other and were charged in separate complaints, but the tax evasion schemes are similar, according to the Kansas City Business Journal.
The government said the stock in the fake corporations was illegally owned by the clients' Roth Individual Retirement Accounts. "These corporations allegedly took payments from the customers' businesses for so-called management services, which were then distributed to the customers' IRAs to enable them to get out of reporting and paying income tax on business income," the Journal said.
Most of the defendants belonged to four groups of brothers with the last name Wazwaz who owned 52 tobacco stores, the Star Tribune said. The Minneapolis newspaper reported that the owners "made numerous attempts to conceal earnings and wealth through fraudulent bookkeeping and tax returns, as well as property transfers and large cash transactions."
As a result of the scheme, Minnesota lost $2.5 million in cigarette tax revenues. The stiffest sentence was meted out to Sabry Mohamed Wazwaz, who was ordered to serve 42 months in prison followed by three years of supervised release plus pay $1.2 million in restitution.
Sunday, March 9, 2008
For some of the crimes involved in the tax evasion scheme, Stephen Michael Ewing could be sentenced to up to 20 years in prison per charge and ordered to pay fines of up to $250,000 per charge. Ewing and two associates at one time controlled 70 nursing homes in Texas, Iowa, Kansas, Virginia and Oklahoma. To cover their tracks and their ownership of the nursing homes, the men created about 150 sham payroll companies.
The other two men involved in the scheme, Larry May and attorney Gary R. Trebert, pleaded guilty to two charges and are awaiting sentencing.
Wednesday, February 27, 2008
Australia, Canada, France, Italy, New Zealand, Sweden, the United Kingdom and the U.S. are working together to investigate their citizens using accounts in Liechtenstein for tax evasion and avoidance, the IRS said.
Monday, February 25, 2008
The Journal said that tax authorities in at least five other countries -- the U.S., U.K., France, Canada and Australia -- also are investigating client data tied to LGT. The newspaper quoted U.S. Sen. Carl Levin as saying the bank "apparently harbored numerous secret accounts which hid the taxable assets of thousands" of people around the globe.
Germany paid a former LGT employee about $6.2 million for the data, the Journal said, and hopes to use the data to recover hundreds of millions of dollars in back taxes.
Monday, February 11, 2008
The IRS published on its website a technical paper about the use of variable prepaid forward contracts, which corporate executives use to turn their stock holdings into cash and defer tax payments on them for several years.
The IRS concludes that the transactions are true sales and thus taxable to the executive. A corporate tax consultant told the Times that the unpaid taxes associated with variable prepaid forward contracts probably total billions of dollars annually.
Wednesday, February 6, 2008
Many of the president's proposals for the agency's budget have bipartisan support, including one that would require brokerage houses, mutual funds and other institutions to report to the IRS what investors pay for stocks and other securities. The aim of cost-basis reporting would be to improve compliance on capital-gains taxes.
In addition, Congress is expected to increase the IRS budget for enforcement activities, such as audits.
Wednesday, January 30, 2008
California Pacific was responsible for the biggest disparity, the report said. It received almost $70 million in tax breaks but spent only $5.2 million on care for the poor and uninsured. Of the total tax breaks, California Pacific got $67 million in state and federal income tax exemptions and $2.8 million in local property tax exemptions.
Chinese Hospital got more than $4 million in tax breaks and spent $265,000 on charity care, according to the report.
Tuesday, January 29, 2008
Federal agents executed search warrants at the properties of dealers, collectors and the museums, including the Los Angeles County Museum of Art (LACMA). No one was arrested, and no charges have been filed in the case.
The recommendation didn't receive much media attention at the time the report was written but was the focus of a story in today's National Law Journal. (Subscription required.)
"If Congress does not bar them, it should require the U.S. Patent & Trademark Office (PTO) to send any tax strategy patent applications to the IRS so that it can quickly address any abuse they may present and help the PTO identify obvious tax strategies that should not be eligible for patents," National Taxpayer Advocate Nina E. Olson wrote in the executive summary of the report.
Monday, January 14, 2008
Snipes is charged with failing to file tax returns for six years, conspiring to defraud the government and filing a false claim for a $7 million tax refund.
"Tax specialists and lawyers say that the Snipes case hinges on whether he can persuade jurors that he sincerely believed that he did not have to pay taxes, while prosecutors will argue that he was just trying to avoid them," reports the New York Times.
Thursday, January 10, 2008
The programs were sold from 2001 through 2005 by the Freedom & Privacy Committee in Oregon, Louisiana, Virginia and Idaho, according to the indictment. A grand jury in Portland, Ore., issued one count against the men for conspiracy to defraud.
Saturday, January 5, 2008
In a decision filed Jan. 4, Emergency Special Judge of Superior Court Clarence E. Horton Jr. wrote that Wal-Mart's structure had no "real economic substance" other than cutting taxes, The Wall Street Journal reported. Wal-Mart had sought a refund of $33.5 million in taxes, interest and penalties that it paid after state tax authorities determined it had underpaid its taxes.
Wednesday, January 2, 2008
This has led to lengthy disputes and court fights between some tax assessors and churches. For instance, the Journal said, Christ Chapel Community Church in Macon, Ga., ended up paying $16,000 for 2005 and 2006 taxes after disputing for 18 months a tax bill for an athletic club it had purchased for $6 million that offered tennis, basketball, and roller hockey for a fee. On the weekend, church members set up seats for 1,000 worshipers.
The changing nature of churches "forces both courts and agencies and tax commissioners to decide what's a religious or charitable use," John Witte Jr., director of the Center for the Study of Law and Religion at Emory University, told the Journal.