How to Report IRS Scammers

March 17, 2016 Press Release
TIGTA - 2016-07
Contact: Karen Kraushaar, Director of Communications
Karen.Kraushaar@tigta.treas.gov
(202) 622-6500
 

J. Russell George Urges Taxpayers to Remain Vigilant Against Scammers

Inspector General Sees Progress in TIGTA’s Efforts to Impede IRS Impersonators

WASHINGTON — Noting progress in the counteroffensive against Internal Revenue Service impersonators who make threatening telephone calls to taxpayers, the Treasury Inspector General for Tax Administration nonetheless advised taxpayers to stay on high alert through the end of the 2016 tax filing season.

“Without question, TIGTA’s efforts have impeded these criminals’ ability to victimize taxpayers over the past few months,” the Inspector General, J. Russell George, said. He noted that TIGTA’s four-part strategy to thwart callers is working. “These efforts are producing results,” he said. “Where the perpetrators used to be able to get a victim every 40-50 calls, now they must make 300-400 attempts to claim a victim,” he added.

TIGTA’s counteroffensive consists of: 1) using an autodialer to call the scammers to advise them that their activity is criminal and to cease and desist; 2) working with telephone companies to shut down the telephone numbers used to perpetrate these crimes; 3) publishing telephone numbers associated with the criminal activity on the Internet; and 4) engaging in outreach efforts with the public, the media, Congress, and other stakeholders to educate taxpayers about the scam. In January, TIGTA launched a series of Public Service Announcements on YouTube; this month, they also became available on the IRS’s YouTube channel.

“Criminals view this scam as they do many others; it is a crime of opportunity,” he said in congressional testimony March 8. “While we plan on arresting and prosecuting more individuals, the scam will not stop until people stop paying the scammers money,” he added. “Our best chance at defeating this crime is to educate people so they do not become victims in the first place. Every taxpayer we protect from this crime is a victory.”

TIGTA has received reports of more than one million contacts since October 2013 and has become aware of over 5,500 victims who have collectively paid approximately $29 million as a result of the scam in which criminals make unsolicited calls to taxpayers fraudulently claiming to be IRS officials and demanding that they send them cash via prepaid debit cards, money orders or wire transfers from their banks.

“If someone unexpectedly calls claiming to be from the IRS or in a new twist, the Treasury Department, and uses the threat of legal action if you do not pay immediately, that is a sign that it is not the IRS calling, and your cue to hang up,” he said. “Again, do not engage with these callers. If they call you, hang up the telephone.”

Inspector General George noted that the scam has hit taxpayers in every State in the country. Callers claiming to be from the IRS tell intended victims they owe taxes and must pay using a pre-paid debit card, money order or a wire transfer. The scammers threaten those who refuse to pay with being charged with a criminal violation, a grand jury indictment, immediate arrest, deportation or loss of a business or driver’s license.

Here is what you need to know. The IRS generally first contacts people by mail – not by phone – about unpaid taxes and the IRS will not ask for payment using a prepaid debit card, a money order or a wire transfer. The IRS also will not ask for a credit card number or your bank information over the phone.

If you get a call from someone claiming to be with the IRS asking for a payment, or your credit card or bank account information, here’s what to do:

• If you owe Federal taxes, or think you might owe taxes, hang up and call the IRS at 800-829-1040. IRS workers can help you with your payment questions.
• If you do not owe taxes, fill out the “IRS Impersonation scam” form on TIGTA’s website, www.tigta.gov or call TIGTA at 800-366-4484.
• You can also file a complaint with the Federal Trade Commission at www.FTC.gov. Add “IRS Telephone Scam” to the comments in your complaint.

TIGTA encourages taxpayers to be alert to phone and e-mail scams that use the IRS name. The IRS will never request personal or financial information by e-mail, text, or any social media. You should forward scam e-mails to phishing@irs.gov. Do not open any attachments or click on any links in those e-mails.

Read more about tax scams on the official IRS website at www.irs.gov.

Corporate Taxes: Are US Multinational Corporations really paying their fair share?

There has been extensive coverage in this blog about how US Multinational Corporations are not paying their fair share by utilizing Transfer Pricing, Inversions and Earnings Stripping to reduce their effective tax rates below the statutory 35%.

Some examples are: Pfizer tried to invert a couple of times to avoid paying the US tax rate, Apple and its Irish transfer pricing, Google with its double Dutch Irish sandwich transfer pricing, Caterpillar with its Swiss structure, and on and on.

Some of these USMNCs have argued that despite utilizing these accounting maneuvers, they still pay their fair share of taxes (See Apple CEO Tim Cook's comments on 60 Minutes).  Others question whether the USMNCs are actually paying their fair share and whether they are contributing to the overall tax gap.

In contrast to USMNCs trying to shift profits offshore to avoid US Tax, there is one USMNC that is paying its fair share.  Disney, yes that Disney, and despite negative criticism (NY Times article re Disney outsourcing tech jobs to India, and Disney caught in the LuxLeaks scandal), it appears as if Disney is actually paying its true tax liability without utilizing the accounting tricks that other USMNCs utilize to reduce their effective tax rates.

According to this Investopedia article, Disney is paying at or near the US corporate tax rate (35%) of income taxes.  For example, the author states that for 2015, Disney had pre-tax income of $13.9 billion and paid corporate income taxes of $4.4 billion.  The author, David Cay Johnston, also states that Disney earned only 1% of its profits in the U.S. and paid about "1.3% if all the corporate income taxes".

Johnston also states that one reason Disney is paying a higher rate of taxes is that Disney is keeping its Intellectual Property in the U.S. and not transferring the IP to low tax haven subsidiaries.  Johnston also criticizes Disney for not spending its profits in reinvesting in U.S. businesses but in conducting stock buy-backs.

Johnston's main point is that Congress should close the transfer pricing incentive/loophole that has permitted companies (Apple, Google, Pfizer to name only a few) to utilize transfer pricing, earnings stripping and inversions to erode the US tax base and pay less taxes.  Johnston also challenges whether the corporate tax is achieving the goals it was designed to achieve.

Maybe Johnston is correct in having Congress re-visit the utility of the corporate tax structure (a similar criticism of Bob Iger's, the Chairman of Disney).  Or maybe the IRS should be doing a better job at enforcing transfer pricing, inversions, and/or earnings stripping to prevent the USMNCs from shifting taxable income it its foreign base subsidiaries, despite its recent loss in the Medtronic case.

If you have specific and credible information about a company utilizing transfer pricing, inversions and/or earnings stripping to minimize its US taxes, contact us about filing an IRS Whistleblower claim to assist the IRS in attacking the various abusive transfer pricing applications by USMNCs.

More Accounting Tricks to Avoid Paying Tax by U.S. Multinational Corporations

As noted in this blog, the difference between tax evasion and tax avoidance is a fine line.  To assist in drawing the line properly and legally, corporations and individuals employ tax attorneys and accountants to minimize their tax liabilities.

As previously discussed in this blog, the triumvirate of "legal" tax dodging by U.S. Multinational Corporations ("USMNCs") is Inversions, Transfer Pricing and Earnings Stripping.  Another less publicized tool used by accountants of USMNCs is the "stock option loophole".  As the Citizens for Tax Justice ("CTJ") reports, USMNCs have utilized the "stock option loophole" to reduce their taxable income in the amount of $64.6 billion over the past 5 years.

Notable (Top 5) USMNCs which have utilized the stock option loophole include:

USMNC	Stock Option Tax Benefits from 2011-2015
Facebook	$5,665,000
Apple	$4,673,000
Google	$1,951,000
Goldman Sachs Group	$1,775,000
J.P. Morgan Chase & Co.	$1,666,000

The CTJ list documents 310 other companies that have reduced their federal and state corporate income taxes by a combined $64.6 billion dollars over the last 5 years.

What is the "stock option loophole"?  Simply put, it is an accounting mechanism to "track" stock options and to deduct the expense of stock options.  Why is this a loophole? The simple answer is that there is a disparity between the price the employee pays for the stock option and the price the stock options are worth.  For a more technical explanation see this PricewaterhouseCoopers (Accounting Firm) explanation.  Based on the PWC article, the USMNCs deduct this difference between the exercised price and the price their employees paid for the stock on the corporate taxes in the year that the options are exercised.

CTJ questions why the USMNCs are allowed a deduction fro giving their employees a benefit but in reality does not cost the USMNCs anything.  CTJ also states that reversing this may help to minimize the Tax Gap.

If you have specific and credible information about a company failing to pay its tax liabilities, contact our firm about filing an IRS Whistleblower claim to assist the IRS in holding the company liable for the taxes they should be paying.