IRS awards UBS whistleblower $104 million

The IRS awarded $104 million to UBS whistleblower Bradley Birkenfeld Tuesday.  In 2007 Birkenfeld played a key role in alerting the U.S. government to the ways the Swiss bank, UBS, was encouraging clients to evade taxes in the U.S.  Following Birkenfeld’s tip, UBS agreed to a $780 million settlement with the Department of Justice, and turned over information on some 5,000 Swiss accounts to the IRS. 

Largely as a result of Birkenfeld’s cooperation and the subsequent investigation of several Swiss banks, the IRS launched its first Offshore Voluntary Disclosure Program in 2009.  Over 33,000 Americans have since participated in the program and the IRS has recouped approximately $5 billion in back taxes and penalties.   

Such a substantial whistleblower reward recognizes the value of Birkenfeld’s contributions to the IRS investigation.  ErikaKelton, a whistleblower attorney at Phillips & Cohen LLP, noted the significance of the reward in a Bloomberg article.  Kelton said, “The government acknowledged that without him or someone in his position, offshore evasion at UBS would still likely be going on.” 

Kelton also noted that although the record of IRS whistleblower program has been discouraging for the past few years, Birkenfeld’s reward bodes well for the momentum of the program.  “This is a powerful statement that things are moving and whistleblowers are welcome and they’re open for business,” said Kelton. 

U.S. now more able to enforce tax law in Panama

The United States and Panama have entered into an agreement to share information about national taxes in both countries for both civil and criminal matters in any tax year after November 2007.

The new tax information exchange agreement (TIEA) was signed by Treasury Secretary Tim Geithner and Panamanian Vice President and Minister of Foreign Affairs Juan Carlos Varela in a ceremony at the U.S. Department of the Treasury. “This bilateral agreement to provide for the exchange of tax information between our two countries reflects the commitment of the United States and Panama to the importance of transparency of tax information,” Secretary Geithner said of the TIEA.

Pursuant to the new TIEA, the United States will have access to information that will help it to enforce U.S. tax laws with respect to accounts held in Panama.

IRS will trade leniency for information

Citizens who voluntarily pay taxes owed on offshore assets could escape criminal prosecution if they provide the Internal Revenue Service with information about the bankers who helped them hide their assets, according to The Wall Street Journal.

"A key part of the program, IRS officials said, is 'developing intelligence' on bankers, lawyers, accountants and others who help the rich hide assets from tax authorities," the Journal reported.

The Journal has posted the IRS guidelines on its website.

IRS tightens reporting requirements on offshore accounts

In another effort to hinder efforts to evade taxes on offshore accounts, the Internal Revenue Service is tightening certain reporting requirements.

The changes include requiring taxpayers to specify on the Foreign Bank Account Report the exact amount in offshore accounts. The Wall Street Journal reports that the IRS also is considering whether to implement changes to its "qualified intermediary" program with foreign banks that would better enable the IRS to ferret out accounts held by U.S. tax evaders.