Fake IRS call center shut down; IRS Scams to watch out for.

Despite the IRS receiving bad press lately for its bad public relations, this Forbes article highlights efforts to stop the IRS scammers from continuing to con US citizens with fake IRS calls threatening jail time or forfeiture actions.

As stated in the article, the callers pose as IRS officials and demand immediate payment and threatening jail or deportation for those failing to comply.  The article also highlights efforts by IRS to try and shut down this scam, i.e. Treasury Inspector General of Tax Administration’s (TIGTA) reporting of the apprehension of 5 individuals in May 2016 responsible for about $2 million in schemes defrauding 1,500 victims.

In the latest news, authorities in Mumbai, India have arrested 70 call center workers for tax related scams following police raids on call centers in India.  Additionally 750 other call center workers were detained as police continue to investigate.  The reports indicate that 7 call centers were being used to accumulate around $149,835 per day.

The IRS has also highlighted the 12 largest tax scams to avoid in its annual Dirty Dozen:  For 2016, the dirty dozen are (in no particular order) See IRS Website:

1. Identity Theft: Taxpayers need to watch out for identity theft especially around tax time. The IRS continues to aggressively pursue the criminals that file fraudulent returns using someone else’s Social Security number. Though the agency is making progress on this front, taxpayers still need to be extremely careful and do everything they can to avoid being victimized. (IR-2016-12)
2. Phone Scams: Phone calls from criminals impersonating IRS agents remain an ongoing threat to taxpayers. The IRS has seen a surge of these phone scams in recent years as scam artists threaten taxpayers with police arrest, deportation and license revocation, among other things. (IR-2016-14)
3. Phishing: Taxpayers need to be on guard against fake emails or websites looking to steal personal information. The IRS will never send taxpayers an email about a bill or refund out of the blue. Don’t click on one claiming to be from the IRS. Be wary of strange emails and websites that may be nothing more than scams to steal personal information. (IR-2016-15)
4. Return Preparer Fraud: Be on the lookout for unscrupulous return preparers. The vast majority of tax professionals provide honest high-quality service. But there are some dishonest preparers who set up shop each filing season to perpetrate refund fraud, identity theft and other scams that hurt taxpayers. Legitimate tax professionals are a vital part of the U.S. tax system. (IR-2016-16)
5. Offshore Tax Avoidance: The recent string of successful enforcement actions against offshore tax cheats and the financial organizations that help them shows that it’s a bad bet to hide money and income offshore. Taxpayers are best served by coming in voluntarily and getting caught up on their tax-filing responsibilities. The IRS offers the Offshore Voluntary Disclosure Program (OVDP) to enable people catch up on their filing and tax obligations. (IR-2016-17)
6. Inflated Refund Claims: Taxpayers need to be on the lookout for anyone promising inflated refunds. Be wary of anyone who asks taxpayers to sign a blank return, promises a big refund before looking at their records, or charges fees based on a percentage of the refund. Scam artists use flyers, advertisements, phony store fronts and word of mouth via community groups where trust is high to find victims. (IR-2016-18)
7. Fake Charities: Be on guard against groups masquerading as charitable organizations to attract donations from unsuspecting contributors. Be wary of charities with names similar to familiar or nationally-known organizations. Contributors should take a few extra minutes to ensure their hard-earned money goes to legitimate and currently eligible charities. IRS.gov has the tools taxpayers need to check out the status of charitable organizations. (IR-2016-20)
8. Falsely Padding Deductions on Returns: Taxpayers should avoid the temptation of falsely inflating deductions or expenses on their returns to under pay what they owe or possibly receive larger refunds. Think twice before overstating deductions such as charitable contributions and business expenses or improperly claiming such credits as the Earned Income Tax Credit or Child Tax Credit. (IR-2016-21)
9. Excessive Claims for Business Credits: Avoid improperly claiming the fuel tax credit, a tax benefit generally not available to most taxpayers. The credit is generally limited to off-highway business use, including use in farming. Taxpayers should also avoid misuse of the research credit. Improper claims generally involve failures to participate in or substantiate qualified research activities and/or satisfy the requirements related to qualified research expenses. (IR-2016-22)
10. Falsifying Income to Claim Credits: Don’t invent income to erroneously qualify for tax credits, such as the Earned Income Tax Credit. Taxpayers are sometimes talked into doing this by scam artists. Taxpayers are best served by filing the most-accurate return possible because they are legally responsible for what is on their return. This scam can lead to taxpayers facing big bills to pay back taxes, interest and penalties. In some cases, they may even face criminal prosecution. (IR-2016-23)
11. Abusive Tax Shelters: Don’t use abusive tax structures to avoid paying taxes. The IRS is committed to stopping complex tax avoidance schemes and the people who create and sell them. The vast majority of taxpayers pay their fair share, and everyone should be on the lookout for people peddling tax shelters that sound too good to be true. When in doubt, taxpayers should seek an independent opinion regarding complex products they are offered. (IR-2016-25)
12. Frivolous Tax Arguments: Don’t use frivolous tax arguments in an effort to avoid paying tax. Promoters of frivolous schemes encourage taxpayers to make unreasonable and outlandish claims Even though they are wrong and have been repeatedly thrown out of court. While taxpayers have the right to contest their tax liabilities in court, no one has the right to disobey the law or disregard their responsibility to pay taxes. The penalty for filing a frivolous tax return is $5,000. (IR-2016-27)

If you have specific and credible information of a tax scam, the IRS will pay between 15-30% of the taxes, penalties and interest it collects from the promoters/perpetrators of the tax schemes, or from the beneficiaries of the tax schemes.  Contact us to evaluate your specific and credible information and whether you should file a tax whistleblower claim to receive an award from the IRS.

Mylan CEO, Heather Bresh, called before House Oversight Committee

EpiPen maker, Mylan, called before House Oversight Committee to explain 400% price increase.

In the news recently, Mylan CEO, Heather Bresh, was called before the House Oversight Committee to discuss Mylan’s increase in prices of the EpiPen.  In case you missed it, EpiPen prices have risen about 400% with a two pack of the lifesaving injection drug at a retail cost of $600.

According to CNN, Ms. Bresh’s testimony before the House Oversight Committee will state that Mylan only makes about $50 for each $300 pen.  Money magazine also details how Mylan is trying to get EpiPen on the Preventative Medicines list, which would allow patients to receive EpiPen will little or no out-of-pocket costs, and so that insurance would have to pick up the cost.

What gets lost in the outrage over a drug price increase, is why the huge increase?  EpiPen has been around a long time, and the process to create EpiPen hasn’t changed for some time, so why the huge increase, and why is Mylan only getting $50 profit from a $300 item. 

One theory is Mylan has been increasing the demand of EpiPen through effective marketing practices.  See this Bloomberg article.  Another often not discussed aspect is transfer pricing, inversions and booking profits offshore.  As stated in the 10-K for Mylan for tax year ended (tye) December 31, 2014, Mylan inverted from a Pennsylvania Company to a Netherlands company with its principal executive offices in Potters Bar, UK. 

As previously discussed in this Blog, one of the key tools U.S. Multinational Corporations (USMNCs) utilize to lower its tax rate is to invert the corporate headquarters to a lower tax jurisdiction. 

Also as previously discussed in this Blog, a second tool used by USMNCs is transfer pricing.  In this case, as stated in this Time article, it costs Mylan about $30 to make each dose of EpiPen.  Mylan likely has the drug filled in the Netherlands or another tax favorable jurisdiction, and then re-sells the drug at the $600 price for a EpiPen 2 pack back to U.S. distributors, thereby booking the costs in the tax favorable jurisdiction. See this primer on transfer pricing.

By using this method (transfer pricing) USMNCs can claim a lower tax rate than the applicable 35% tax rate.  While I am not saying that Mylan utilizes transfer pricing, one indicator that Mylan may be utilizing transfer pricing is in its 10K, Mylan states that for 2014, Mylan only pays an effective tax rate of 4.2%.  (FYI, the statutory rate is 35% for corporations in the United States.)  Mylan also lists on is 10K that it approximately $693 million permanently reinvested in its foreign subsidiaries, which is how companies disguise on their 10K amounts they are holding offshore to avoid taxation in the U.S.

So this begs the question, why can Congress call Ms. Bresh to appear before the House Oversight Committee to discuss pricing, but the IRS can’t call Mylan to conduct an analysis of its transfer pricing or its inversion practice?

If you know of a corporation undervaluing assets in its transfer pricing models, contact our firm to discuss filing a tax whistleblower claim.  IRS will pay an award between 15-30% of collected proceeds (tax, penalties, and interest) to whistleblowers who provide substantial and credible information used by the IRS in prosecuting the alleged tax violators.

$22 Million Whistleblower Award

$22 Million Whistleblower Award for Company Insider Who Helped Uncover Fraud
FOR IMMEDIATE RELEASE
2016-172
Washington D.C., Aug. 30, 2016 —

The Securities and Exchange Commission today announced the award of more than $22 million to a whistleblower whose detailed tip and extensive assistance helped the agency halt a well-hidden fraud at the company where the whistleblower worked.

The $22 million-plus award is the second-largest total the SEC has awarded a whistleblower. The largest, $30 million, was awarded in 2014.

“Company employees are in unique positions behind-the-scenes to unravel complex or deeply buried wrongdoing. Without this whistleblower’s courage, information, and assistance, it would have been extremely difficult for law enforcement to discover this securities fraud on its own,”

— said Jane Norberg, Acting Chief of the SEC’s Office of the Whistleblower

The SEC’s whistleblower program, which has been rewarding valuable information from tipsters since its inception in 2011, has now surpassed $100 million in total money awarded. More than $107 million has been awarded to 33 whistleblowers who became eligible for an award by voluntarily providing the SEC with original and useful information that led to a successful enforcement action. Whistleblower awards can range from 10 percent to 30 percent of the money collected when the monetary sanctions exceed $1 million. All payments are made out of an investor protection fund established by Congress that is financed through monetary sanctions paid to the SEC by securities law violators. No money has been taken or withheld from harmed investors to pay whistleblower awards.

By law, the SEC protects the confidentiality of whistleblowers and does not disclose information that might directly or indirectly reveal a whistleblower’s identity.

For more information about the whistleblower program and how to report a tip: www.sec.gov/whistleblower.