At the Senate Finance Committee’s hearing on the Cayman Islands and offshore tax evasion last week, Senator Charles Grassley reiterated the importance of the new IRS Whistleblower program to combat tax evasion, but also stressed the need for Congress to provide the IRS greater tools to address offshore tax evasion.

The July 24 hearing focused on GAO’s investigation into the Ugland House, a law firm’s office building in the Cayman Islands that is the registered address of thousands of corporations. The hearing also examined
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This past week the IRS Commissioner of the Large and Midsized Business Division summarized the IRS’s efforts to combat offshore tax evasion. He predicted that whistleblowers will become increasingly important to the IRS’ efforts, given the existence of the new IRS Whistleblower rewards.

IRS Commissioner Frank Ng described to Congress the “critical importance to tax administration in this country — the practice of sheltering U.S. earned income in foreign jurisdictions as a means of avoiding U.S. taxation.”

He identified as “Tier I” issues the following transactions::

One of the most meaningful improvements of the new IRS Whistleblower Program authorized by Congress in December 2006 is that IRS Whistleblowers have an enforceable right to a reward when they report significant tax violations. To enforce that right, tax whistleblowers can seek review by the U.S. Tax Court of award decisions.

This week, the United States Tax Court has proposed amendments to its Rules of Practice and Procedure regarding whistleblower award actions, which can be found at http://www.ustaxcourt.gov/press/060208.pdf. The IRS Whistleblower Office is expected to review the proposed Rules now and provide feedback to the Court.

The Tax Court also has invited public comments on the proposed amendments, to be received by July 31, 2008.

(Updated) For a national conference of employment lawyers, I was asked to participate in a panel discussion of “Strategic Thinking in Whistleblower Cases” and to explain the new IRS Whistleblower Program.

Bogus tax shelters and other tax fraud and evasion are among the common reports by tax whistleblowers to whistleblower attorneys. Today, the government launched a new, coordinated federal effort by the IRS, the Justice Department’s Tax Division, and U.S. Attorneys to stop fraudulent tax claims, frivolous tax returns, and bogus tax schemes.

Quoting former Supreme Court Justice Oliver Wendell Holmes’ famous observation that “[t]axes are what we pay for a civilized society,” Nathan J. Hochman, the Tax Division’s Assistant Attorney General, announced
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The IRS this week announced another interesting development in its new IRS Whistleblower Program, which this whistleblower lawyer blog has followed closely. This announcement addressed new regulations permitting the IRS to share tax return information with whistleblowers and their lawyers under written contracts with the IRS, and also to advise those whistleblowers and their attorneys about the status of their whistleblower claims.

On March 25, 2008, the IRS announced new, temporary regulations permitting “disclosure of [tax] return information . . . to
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Our whistleblower lawyer blog has followed closely investigations of hedge funds and other offshore investors for tax fraud and other IRS violations. After investigating a tax fraud conspiracy involving offshore companies and offshore bank accounts, the Justice Department and the IRS have announced that an attorney and two certified public accountants have pleaded guilty to tax fraud and aiding the preparation of a false tax return.