IRS audits of major corporations decrease

The number of Internal Revenue Service audits of large corporations has decreased, according to an analysis by the Transactional Records Access Clearinghouse—which shows how important whistleblowers can be for uncovering tax fraud and other tax violations.

The research group, based at Syracuse University, says, “Among corporations reporting assets of $250 million or more, the IRS since FY 2005 has cut back by a third (33 percent) the hours it spends examining their books. IRS has also sharply reduced the number of large corporate returns it examines — these audits have fallen by 22 percent since 2005.”

The IRS disputes TRAC’s conclusions, Reuters reports. Steven Miller, deputy commissioner of services and enforcement, said the IRS audits about half of the corporations with assets of between $5 and $20 billion and all corporations with assets greater than $20 billion.

Tax-exempt status of Illinois hospital is revoked

The Illinois Supreme Court has upheld the state’s decision to take away the tax-exempt status of Provena Covenant Medical Center, agreeing that the Catholic hospital hadn’t provided enough charity care.

The state argued that Provena had provided free or discounted care to only 302 patients out of 10,000, spending only 0.7 percent of its $113 million in revenues, according to the National Law Journal. (Subscription required.)

Meanwhile, U.S. Sen. Chuck Grassley (R-IA) and Rep. Bobby Rush (D-IL) have joined together to crack down on tax-exempt hospitals that fail to treat patients without insurance, according to The Hill newspaper. Grassley has been a strong proponent of ensuring tax-exempt hospitals provide enough care to low-income and uninsured patients to merit the tax breaks the hospitals get.

IRS Issues Dirty Dozen List of Tax Scams for 2010

The Internal Revenue Service (IRS) has issued its “Dirty Dozen” tax scams list for 2010, which includes hiding income offshore and disguising corporate ownership—schemes that whistleblowers often expose.

“IRS agents continue to develop their investigations of these offshore tax avoidance transactions using information gained from over 14,700 voluntary disclosures received last year,” the IRS said in a statement.

The IRS said it is concerned about disguised corporate ownership because “such entities can be used to facilitate underreporting of income, fictitious deductions, non-filing of tax returns, participating in listed transactions, money laundering, financial crimes and even terrorist financing.”

Off-shore accountholders fear IRS tax penalties

Lawyers who handle tax disputes with the Internal Revenue Service have been inundated with calls from people who have off-shore accounts and are concerned their foreign banks will hand over information about their accounts to the IRS.

The Daily Record, a legal trade newspaper in California, reports that “Stoking the panic are two deals that UBS has reached with the U.S. government this year — the first in February — to hand over the account information of U.S. customers suspected of offshore tax evasion.”

The Record interviewed several lawyers who said the number of clients they are representing in voluntary tax disclosures as increased tremendously. One lawyer in California said he normally handles one or two voluntary tax disclosures cases a year; right now he has cases involving 140 clients on the West Coast alone.

IRS extends deadline for disclosing off-shore accounts

The Internal Revenue Service is extending the deadline for special voluntary disclosures by taxpayers with unreported income from hidden offshore accounts from Sept. 23 to Oct. 15.

Under special provisions issued in March, taxpayers who voluntarily disclose their hidden accounts possibly could receive less harsh civil penalties and avoid criminal prosecution. The IRS extended the deadline in response to requests from lawyers representing some of those who are willing to disclose offshore accounts. The IRS said it wouldn't allow any further extensions.

UBS, U.S. and Swiss reach deal on releasing names of possible tax evaders

UBS AG and the U.S. and Swiss governments have worked out agreements to settle a dispute over whether the Swiss bank should be forced to disclose the names of 52,000 wealthy American clients suspected of tax evasion, media outlets reported today.

UBS and the two governments have initialed agreements that will "take a little time to be signed in final form," Department of Justice lawyer Stuart Gibson told U.S. District Court Judge Alan Gold during a brief conference call on Wednesday, according to Reuters.

"For U.S. taxpayers it is going to be impossible to hide money in Switzerland and it is just a matter of time that this is the case also for Germans and Britons," Asher Rubinstein, a partner at law firm Rubinstein & Rubinstein, said in a separate story by Reuters.

See also:

- UBS Tax Lawsuit Settled by U.S., Swiss Governments (Bloomberg)

- UBS Welcomes IRS Settlement (Dow Jones Newswires)

Guernsey: low-tax jurisdiction or tax haven?

The New York Times ran an article today about Guernsey's popularity with rich Britons who take advantage of a loophole in British law that allows individuals to become nonresidents for tax purposes but remain citizens as long as they do not spend more than 90 days a year on British soil.

But British authorities are beginning to challenge the application of that loophole, the Times says.

The Times story cites an estimate by the Organization for Economic Cooperation and Development that "wealthy individuals hold about $6 trillion offshore, resulting in billions of dollars in lost tax revenue for their home countries annually."