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IRS whistleblower jailed, and rewarded

Our Minnesota readers are no doubt aware that the Internal Revenue Service is looking for money. The agency is looking to collect uncollected taxes, trying to find and stop tax fraud, conducting audits and offering amnesty for those with offshore bank accounts. The IRS also has a whistleblower program with millions ready to give to those with the right kind of information.

Recently it was reported that a 47-year-old banker served 31 months of a 40 month sentence for helping a UBS AG employee commit tax evasion via an offshore account in Switzerland. It was also reported that the IRS awarded the 47-year-old banker $104 million for his whistleblower information — minus taxes of course.

The information that the former banker was able to provide allowed the IRS to recover $5 billion in back taxes and penalties from as many as 4,700 Americans. In addition to that, UBS was fined $780 million.

The information that the 47-year-old provided was not part of a plea deal, and the ex-banker’s tax fraud charge was prosecuted separately according to the IRS. However, without the information from the 47-year-old, the IRS may not have discovered the method by which thousands of Americans were hiding billions of dollars in overseas accounts. There were no other criminal charges reported that were related to the whistleblower or his information.

The whistleblower program was strengthened in 2006 to target high-earning tax dodgers and guarantees an award for whistleblowers if at least $2 million in unpaid taxes, interest and penalties is collected.

Although critics maintain that the IRS does not give out enough whistleblower awards, the agency collected $48 million from so-called scofflaws and handed out $8 million in awards last year.

Source: StarTribune, “Whistleblower imprisoned for tax fraud gets $104 million from IRS for helping expose cheating,” Alan Fram, Sept. 11, 2012

At our Minneapolis law firm we represent clients with the full range of federal and state tax issues including IRS audits and assisting clients who wish to receive amnesty for their tax debt due to offshore bank accounts.

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