Some commentators are noting that the recent prosecution of an individual for filing a false federal estate tax return may signal the Service's new "get tough" policy on estate and gift tax fraud. Prior to the Whistleblower Rewards Act of 2006, prosecutions in the area have been lean.
The recent criminal case involved a woman who was the executrix of her mother's estate. She admitted that she intentionally omitted assets worth $400,000 from the Form 706, the federal estate tax return. The executrix faces possible imprisonment, supervised release, and large fines and penalties.
Previously it was thought that the Service might be trying to adhere to the Bush administration's wishes that estate taxes simply disappear. While Bush supported the elimination of the estate tax entirely, administrative proposals met with little support. Some feel that the administration then decided to gut the ranks of IRS employees to de facto eliminate enforcement of estate tax collection. In March 2008, outraged IRS employees sounded off about the Agency's decision to terminate 157 of its 345 estate tax lawyers. The IRS itself had noted that 85 percent of the large taxable gifts it audited were fraudulent and intended to cheat the public. For every hour that the Service's estate tax lawyers work, they uncover an average of $2,200 in taxes that Americans worth $1 million or more illegally withheld from the government. The Service's estate tax attorneys uncover about $1.4 billion in lost tax revenues per year. While the Service appears to be recruiting again, it's unclear whether those lost, and profitable, estate attorneys will be restored to the IRS rolls.
Estate and gift tax claims present an area of opportunity for whistleblowers. With a decrease in IRS estate tax attorneys, the Service will need to increase its reliance on informants to point out fraudulently reported Form 706 claims. Old tax returns and appraisals can help. The more credible the claim, the more likely it will be that the Service will decide to devote resources to the claim's investigation.
If you believe you have a viable estate or gift tax evasion claim, call KEMY for a free assessment today.
Wednesday, October 21, 2009
Friday, October 16, 2009
TIGTA Cites Deficiencies in Resolution of Whistleblower Claims
The Treasury Inspector General For Tax Administration (TIGTA) issued a report entitled, "Deficiencies Exist in the Control and Timely Resolution of Whistleblower Claims." TIGTA assessed the IRS's implementation of the Whistleblower Office and the controls monitoring whistleblower claims. The report identified three general areas of problems:
1. Multiple inventory systems and inadequate procedures and processes result in ineffective control over Whistleblower claims;
2. Whistleblower claims are not resolved in a timely manner; and
3. The law's lack of employee protection against retaliation places whistleblowers at risk for reporting tax fraud.
The life of a whistleblower claim can be extraordinarily long when compared to most any other kind of agency action. TIGTA noted that the Whistleblower Office recently paid an award on a claim 15 years after the claim was received. Generally, the Whistleblower Office will tell claimants that payments could take 10 years, assuming the claim is successful at all.
TIGTA identified improper delays in notifying claimants when their claims were rejected. The most common reason for rejecting a whistleblower claims was that the targeted taxpayer was already under investigation by the Service. TIGTA estimated that once the IRS made a decision to deny a claim, it took 6.5 months to notify a claimant that his or her request for reward had been rejected. Twelve claimants had not been notified by the time of the TIGTA review, though the Service had rejected the claim 290 days before.
A significant obstacle to timely resolution has been the Service's multiple inventory systems for tracking claims. The Whistleblower Office uses three inventory systems to track rewards claims currently. The systems did not accurately track information about claims, and it was frequently inconsistent in its reports of claims. One problem has been incorrect claim receipt dates. The Service has been working on a single inventory system, called E-TRAK, and hopes that it can capture claim information accurately from the multiple systems currently in place and transfer them to one inventory mechanism for all 7623(b) claims. The Whistleblower Office expects this single inventory system to be fully in place sometime in 2010.
TIGTA made a number of recommendations, including one to add retaliation protection to the statute. Several IRS analysts had reported that whistleblowers requested protection from the targeted taxpayers but the IRS had no way to respond. TIGTA recommends that the legislation be amended to provide specific relief to whistleblowers who become victims of retaliation.
1. Multiple inventory systems and inadequate procedures and processes result in ineffective control over Whistleblower claims;
2. Whistleblower claims are not resolved in a timely manner; and
3. The law's lack of employee protection against retaliation places whistleblowers at risk for reporting tax fraud.
The life of a whistleblower claim can be extraordinarily long when compared to most any other kind of agency action. TIGTA noted that the Whistleblower Office recently paid an award on a claim 15 years after the claim was received. Generally, the Whistleblower Office will tell claimants that payments could take 10 years, assuming the claim is successful at all.
TIGTA identified improper delays in notifying claimants when their claims were rejected. The most common reason for rejecting a whistleblower claims was that the targeted taxpayer was already under investigation by the Service. TIGTA estimated that once the IRS made a decision to deny a claim, it took 6.5 months to notify a claimant that his or her request for reward had been rejected. Twelve claimants had not been notified by the time of the TIGTA review, though the Service had rejected the claim 290 days before.
A significant obstacle to timely resolution has been the Service's multiple inventory systems for tracking claims. The Whistleblower Office uses three inventory systems to track rewards claims currently. The systems did not accurately track information about claims, and it was frequently inconsistent in its reports of claims. One problem has been incorrect claim receipt dates. The Service has been working on a single inventory system, called E-TRAK, and hopes that it can capture claim information accurately from the multiple systems currently in place and transfer them to one inventory mechanism for all 7623(b) claims. The Whistleblower Office expects this single inventory system to be fully in place sometime in 2010.
TIGTA made a number of recommendations, including one to add retaliation protection to the statute. Several IRS analysts had reported that whistleblowers requested protection from the targeted taxpayers but the IRS had no way to respond. TIGTA recommends that the legislation be amended to provide specific relief to whistleblowers who become victims of retaliation.
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