Tax Fraud

U.S. citizens and residents have an obligation to report to the Internal Revenue Service on Schedule B of a U.S. Individual Income Tax Return (Form 1040) whether that individual had a financial interest in, or signature authority over, a financial account in a foreign country in a particular year by checking “Yes” or “No” in the appropriate box and identifying the country where the account was maintained.   Moreover, U.S.

There are reports surfacing that the U.S. Attorney’s Office in Manhattan is contemplating bringing tax fraud charges against Bernard Madoff’s sons and brother, apparently in lieu of claims more directly relating to the Ponzi scheme. This is, of course, reminiscent of how the government nailed Al Capone back in the day.

The UBS settlement and the subsequent announcement that 14,700 Americans revealed their secret overseas bank accounts last year in a deal with the federal government may be just the tip of the iceberg. An article in today’s New York Times explains that a former banker from another Swiss bank – Julius Baer – is blowing the whistle on what may very well be tax avoidance schemes involving that institution. 

Can a commodities trader sue a law firm for legal malpractice for allegedly supporting a tax shelter plan that the Internal Revenue Service found unacceptable because it utilized excessive amounts of whole life insurance, where the law firm had issued an opinion letter expressing that it was legal? Not where the opinion letter contained a caveat that it was solely for the benefit of the pension company and its professional advisers – and not for employers.

Earlier today, we reported on new IRS procedures relating to certain tax preparers. It looks as if today is Tax Preparer Day – a federal court has issued a preliminary injunction barring Penny Lea Jones of Idaho Falls, Idaho, from preparing federal income tax returns for others. The court found that Jones promotes a tax defier scheme that claims large fraudulent tax refunds for customers. The order, entered by U.S. District Judge Edward J.

We know it was just the holiday season, but it’s apparently now time to start thinking about taxes. At least, that’s what the IRS is thinking. And it has proposed changes to the current system, whereby anyone may prepare a federal tax return for anyone else and charge a fee.

Everyone has to follow the law, but, one might argue, lawyers should be at least a bit more attentive to it. So, what happens to a lawyer who fails to file or pay taxes? The other day, a lawyer who had been a partner at the Kaye Scholer law firm was suspended for six months. That happened even though he had been the head of the firm’s pro bono program.

For much of this past year, the U.S. government pressured Swiss bank UBS and the Swiss government to turn over information on U.S. holders of UBS bank accounts. The feds believed that some – actually, a lot – of those account holders were avoiding U.S. taxes. 

A few years ago, New York law was changed to prohibit unemployment insurance tax rate manipulation under the New York State Unemployment Tax Act.  In the past three years, the authorities have found 354 employers who failed to report transfers of employees properly – these employers collectively owed in excess of $20 million in taxes. 

In conjunction with the federal government’s announcement that more than 14,700 taxpayers voluntarily came forward after the government reached a settlement in August with UBS, we also should note that the IRS today explained what criteria UBS is using to turn over names to the U.S. government.