What is Tax Fraud?
Tax fraud is the deliberate attempt to evade or defeat any tax that is lawfully due. While companies and citizens may legally seek to lower their tax burden as much as possible, outright fraud and exploiting loopholes in order to pay fewer taxes to Federal and State governments is illegal and can be reported to the IRS under the IRS whistleblower program. Those who earn income through global trade and services have also several additional methods to abuse these exploits and avoid due payments. The penalties for this type of felony include civil and criminal fines, imprisonment and back payment with interest.
Is Tax Avoidance legal?
Many unscrupulous corporations attempt to disguise their illegal actions as “tax avoidance,” which is the legal utilization of the loopholes in the code to lower the amount of income tax owed. Although this is not defined as a felony, cheating the system by shifting profits to offshore subsidiaries deprives the government of critical resources used to fund its many social programs.
What is Tax Evasion?
Tax evasion is a part of tax fraud generally used when someone is charged with liabilities. It is a willful act of misrepresentation of one’s income to the authorities, such as overstating deduction or expenses or purposely failing to file tax returns.
Is Negligence a crime?
Since the tax code is an imposing set of laws and regulations which are often really hard to be deciphered, the IRS does not prosecute those who commit careless errors in good faith. If no signs of a scam are found, the taxpayer is assumed to have committed just an honest mistake by the auditor. However, a fine of 20% of the underpayment must still be paid.
Impact of Tax Fraud
The IRS estimates that tax fraud, evasion, and underpayments directly result in the Federal Government collecting $450 to $500 billion less in tax revenue each year. This gap must be bridged by either cutting funding for federal programs or by increasing the burden on law‐abiding U.S. taxpayers to generate more revenue.
This type of fraud is difficult to detect and even harder to prove because the authorities must show that the underpayment was intentional. This could be difficult in large companies where accounting and records keeping procedures are complex and easily manipulated. Often, only company insiders know the true story of why or how a corporation cheated the authorities by using shell companies or hiding funds in international tax havens such as Panama to conceal their true earnings. In fact, international tax schemes may be costing the federal government (and American taxpayers) as much as $160 billion every year. The IRS lacks the resources to uncover these sophisticated scams and relies on whistleblowers to help them through the investigations.
How to report tax fraud with the IRS Whistleblower Program
After the success of the False Claims Act, the IRS Whistleblower Office was created in December of 2006. This Rewards Program pays a percentage of the recovery between 15% and 30% of the total amount reclaimed to those who blew the whistle, and resulted in more than $25 billion in recoveries by the U.S. government. Individuals may report any type of tax fraud ranging from underpayment and negligence to outright evasion.
Learn more about the IRS Whistleblower Program here
Why should you choose us to help you fight against Tax fraud?
Finding a competent lawyer to help you report a crime to the IRS is necessary to maximize your award. We played a crucial role in helping many plaintiffs secure some of the most notable whistleblower settlements in the history of our country. Our team includes some of the most famous personalities in whistleblowing that will help you during the investigation and trial phases.
Types of Tax Fraud
Common forms of Tax Fraud
- Deliberately underreporting or omitting income from tax filings
- Overstating or claiming a false amount of deductions that a company is eligible or qualified for
- Falsifying accounting books and records
- Hiding or transferring assets or income
International Tax Evasion
Sellers and producers who collect value added taxes (VAT) from their customers may evade payment by under-reporting the amount of sales. Companies may under‐invoice or misrepresent the quantity or type of goods being imported (evasion of custom duties).
Smuggling
Smuggling is the complete avoidance of custom duties by importing goods through illegal means. In some cases, a company may smuggle high value goods in a shipment declared to only contain lower value products.
Foreign tax havens
Secret tax shelters and corporate shells allow some companies to hide a portion of their profits in other countries. Illegal tax havens have been connected to corporate fraud, money laundering, and terrorism.
Transfer pricing fraud
Companies sometimes shift profits and expenses between parent and subsidiary companies to manipulate the stock market or avoid taxes. Transfer pricing fraud is sometimes called transfer mispricing.
Foreign Tax Credit Fraud
Some corporations claim they paid taxes to a foreign country in order to take a credit or deduction in the U.S..
Famous Cases of Tax Fraud
G.B. Enterprises False Deductions
In 1996, G.B. Enterprises filed a fraudulent return where it included over $5 million in improper deductions. For over 8 years, the car dealing company exaggerated its sales commissions by $56,879,852 to artificially create a larger tax penalty. In June 2004, G.B. eventually agreed to pay $36.5 million for tax fraud offenses.
The UBS Bank
In 2009, UBS settled with the IRS for $780 million following claims that it had unlawfully aided U.S. citizens in hiding their assets in Swiss bank accounts. A whistleblower who contributed to the investigation received a $104 million reward for the information he provided.
Falsified Records
UPS paid $25 million to the U.S. Department of Justice and an additional $4.2 million to pay a whistleblower suit that claimed the shipping business falsified delivery records for government packages.
Is your case going to be successful?
If you took part or witnessed any widespread fraudulent tax behavior, you may take the first step and become a whistleblower. However, not every claim is valid, so in order to increase your chances of success you need to substantiate your claims with non-public information and evidence.
Take the first step
If you or someone you know has information about tax fraud, our expert legal team will conduct a free case evaluation to help you better understand your legal options and what you can expect should you decide to file a whistleblower claim. If you delay in filing a claim it can weaken your case and reduce your potential reward, so we urge you to contact us by filling out a form or calling toll-free at 1-800-681-3228. Your first consultation is free and confidential.