JD Journal » Internal Revenue Service

IRS Pays Out First Award Under New Provisions of Whistleblower Program

rebneely — Mon, 11 Apr 2011 13:26:26 +0000

In recent days, the IRS paid an accountant a $4.5 million award – the first under the new provisions of the Whistleblower Program – for finding an estimated $20 million of tax underpayment by his employer.

The Whistleblower Program was changed pursuant to section 7623(b) of the Internal Revenue Code, which was enacted on December 20, 2006.

The IRS Whistleblower Office opened in Washington, D.C. in early 2007.

The new IRS Whistleblower statute gives anyone with information about large-scale tax underpayments, including accounting errors or tax fraud up to 30% of any money collected based upon the information provided.

Tax Partner Scott A. Knott of The Ferraro Law Firm was quoted as saying in an April 8th press release at PR Newswire: “The case that resulted in an award yesterday took over three years to come to fruition, but because of how long it takes the IRS to audit and collect for a tax year, we advise clients that this is typically a 4-7 year process.”

Gregory S. Lynam, also a Tax Partner of the firm, was quoted as saying: “The IRS making good on Congress’s promise to pay for valuable information should also reassure potential whistleblowers with high quality information. Now the floodgates will open. The IRS could have a hard time handling all of the submissions they are going to receive.”

The Government Accounting Office (GAO) estimates the difference between what taxpayers pay and what is actually owed is nearly $350 billion per year.

Morning Roundup

joshua — Wed, 27 Oct 2010 13:15:22 +0000

Good morning everyone! Today is Wednesday, October 27th. Here’s a quick look back at yesterday’s stories.

Four litigators from medical malpractice firm Duffy & Duffy were named top attorneys by Super Lawyers magazine…

Seven partners at national litigation firm Milberg were named by Super Lawyers as top lawyers in the New York metro area…

Eighty-one lawyers from Thompson Hine LLP were selected for inclusion in The Best Lawyers in America 2011…

Veteran federal tax attorneys, Daniel A. Dumezich and Gary S. Colton, Jr., joined Winston & Strawn LLP’s office in Chicago office as partners….

Milberg LLP was named to the National Law Journal’s 2010 Plaintiffs’ Hot List…

Veteran Federal Tax Attorneys Join Winston & Strawn as Partners

joshua — Tue, 26 Oct 2010 15:56:44 +0000

Veteran federal tax attorneys, Daniel A. Dumezich and Gary S. Colton, Jr., have joined Winston & Strawn LLP’s office in Chicago office as partners. Both join from Mayer Brown.

For more than twenty years, Dumezich has represented numerous individuals and companies, including international financial institutions and public accounting firms, in complex tax controversies before the Internal Revenue Service and various state taxing authorities. He will head Winston & Strawn’s highly-regarded Federal Tax Controversy Practice.

Colton is also experienced in all aspects of tax controversy work, ranging from IRS examinations through administrative appeals and litigation.

Most recently, Dumezich has represented taxpayers in matters under IRS Examination or in IRS Appeals exceeding $4 billion in proposed adjustments or settlements.

Colton has extensive experience with all aspects of tax-advantaged transactions, discovery disputes, and privilege issues. He has helped garner favorable outcomes over the years for such important entities as United Parcel Service of America and Comcast Corporation.

In the press release at the firm’s website, managing partner Thomas Fitzgerald was quoted as saying: “We are very pleased that Dan and Gary have joined Winston & Strawn/ Our historically strong tax controversy practice has always been noted for its administrative audits and appeals work, and the depth of our tax litigation capabilities will be significantly enhanced by the proven talent, energy and focus of these highly-regarded attorneys.”

Winston & Strawn LLP is an international commercial law firm with 14 offices in America, Asia and Europe.

IRS Creates Internships for Law Students

Erik Even — Thu, 14 May 2009 17:05:43 +0000

The “evil” Internal Revenue Service, which I always have to remind people doesn’t keep the money, has created two internships for law students who are studying tax law.

The division that reviews employee pension plans has hired two law student interns this summer, and may expand the program next year.

The students, from John Marshall Law School in Chicago, will work in Washington, DC for three months this summer. There is no salary or stipend, but the students will receive class credit.

Although the IRS is not hiring right now, it hopes to be able to make job offers to successful interns in the future.

Law Firm Accuses Suge Knight Of “Gangster-Style” Business

Erik Even — Sun, 25 Jan 2009 17:00:34 +0000

New York litigation firm Kaye Scholer, representing the trustee in hip hop entrepreneur Marion “Suge” Knight’s bankruptcy case, is requesting a $6.8 million fee for handling last week’s auction of Death Row Records.

“The representation of the Trustee in this case has been particularly complex due to the individuals involved in the company’s operations and [the] intentionally illicit, ‘gangster-style’ business operations of the debtor,” stated a Kaye Scholer bankruptcy case fee application.

Scholer cites expenses used to recover assets Knight intentionally hid as a large contributor to the $6.8 million tab.

Those assets allegedly included “a Malibu home, that Knight transferred to friends in an effort to shield those assets from creditors, a secret storage locker in Michigan that contained a ‘treasure trove’ of unreleased songs by famous Death Row artists [and] other secret tracks–and records of hidden bank accounts–stashed in a southern California warehouse.”

Kaye Scholer joins a list of creditors that includes Death Row co-founder Lydia Harris and the Internal Revenue Service.

Via Hip Hop DX.

LA County DA Not Immune to Retaliation Claim

Erik Even — Fri, 16 Jan 2009 19:03:13 +0000

The 9th US Circuit Court of Appeals has ruled that Los Angeles County District Attorney Steve Cooley is not entitled to qualified immunity from a retaliation claim filed by a deputy DA who spoke publicly about problems tied to an investigation of a failed $200 million school construction project.

David Eng served on a task force to investigate fraud and environmental crimes associated with construction of the Los Angeles Unified School District’s Belmont Learning Complex, which was halted in 1999. He was demoted and falsely charged with a misdemeanor relating to the misuse of office computers after concluding, as part of the task force, that no crimes had been committed. Cooley was elected in 2000 on a campaign to prosecute individuals tied to the Belmont project.

The 9th Circuit found that Eng was within his First Amendment rights when he blew the whistle on a task force colleague who had leaked to the IRS that the school district had committed fraud when purchasing the Belmont facility. The panel also found that a lawyer Eng hired to defend him against the misdemeanor charges, Mark Geragos, was within his First Amendment rights to speak about the retaliation against Eng in a 2003 Los Angeles Times article.

The panel held that “the full range of adverse employment action appears to have been a politically-motivated effort to silence Eng, who stood to embarrass Cooley by undermining a central plank in his campaign platform.”

Ex-Bechtel Lawyer Acquitted in Tax Case

Erik Even — Fri, 19 Dec 2008 17:22:32 +0000

After an hour’s deliberation, an Oakland, California jury acquitted former Bechtel global tax manager Mark Muntean on charges that he caused the company to file a false tax return. Federal prosecutors argued that Muntean, an attorney, knew a research and development credit claimed by Bechtel was improper, but filed it anyway.

Muntean’s lawyer, John Youngquist, countered that his client trusted subordinates to give him complete information, but they did not. Bechtel corrected the error after Idaho tax authorities raised questions.

News of Muntean’s indictment was widely covered in the professional press, leading to fears that the government was trying to criminalize tax advice that turned out to be simple error. Sideman & Bancroft partner Jay Weill, who was the longtime tax chief in the Northern District US Attorney’s Office, said he had never seen a similar prosecution.

Muntean claimed a $3.3 million R&D tax credit for a project in Idaho. But since that project was financed by the government, the company wasn’t allowed to benefit from the credit. As soon as the outside counsel’s investigation found that improper tax credits had been taken, Bechtel voluntarily disclosed the improper credits to the IRS and filed an amended return.

Bechtel brought in Shearman & Sterling partner B. John Williams Jr., former chief counsel of the IRS under President Bush, to do an internal investigation. According to Youngquist, Williams fingered Muntean and turned the contents of his probe over to the government.

Without the Shearman probe, the government never would have focused on Muntean, Youngquist contends, adding that his client may now have a civil claim against the company.

After leaving Bechtel, Muntean landed at Jeffer, Mangels, Butler & Marmaro. But he had to resign that job once the indictment became public.

San Francisco-based Bechtel is the largest engineering company in the United States, ranking as the nation’s 9th-largest privately owned company.

Does a Girlfriend Count As an Employee?

Erik Even — Thu, 18 Dec 2008 23:18:58 +0000

Howard Shih was dating Jue-Ya Yang when he invited her to move in with him. For a year she lived in his home and occasionally helped with chores. Shih gave Yang $10,500 in checks for personal and household expenses.

When tax time rolled around, Shih decided to claim a deduction on the $10,500. On a Form 1099-MISC, Miscellaneous Income, he claimed the $10,500 was wage income. Yes, he considered his live-in girlfriend an employee.

So one would imagine that Shih would get in trouble with the IRS.

Nope. Yang did, for not reporting the “income.”

Fortunately, the US Tax Court has now ruled against Shih. They held that the $10,500 in payments made during 2005 was a gift and not reportable as income.

The court did not buy Shih’s assertions under oath that he could not remember any dates or romantic encounters with Yang.

Via TaxProf Blog via Above the Law.