SWISS TAX EVASION ENABLER PLEADS GUILTY

FROM:  U.S. JUSTICE DEPARTMENT 

Wednesday, April 30, 2014

Swiss Offshore Tax Evasion Enabler Pleads Guilty

Josef Dörig, 72, of Switzerland, pleaded guilty today to conspiring to defraud the Internal Revenue Service (IRS) in connection with his work as the owner of a trust company in Switzerland.  Deputy Attorney General James Cole, Assistant Attorney General Kathryn Keneally for the Justice Department’s Tax Division, U.S. Attorney Dana J. Boente for the Eastern District of Virginia and IRS-Criminal Investigation Chief Richard Weber made the announcement after the plea was accepted by U.S. District Judge Gerald Bruce Lee.  Dörig was charged in a one count superseding indictment on July 21, 2011.  Sentencing is set for Aug. 8, 2014, and Dörig faces a statutory maximum sentence of five years in prison.

“Today’s plea further pulls back the curtain on efforts by Swiss banks to help U.S. taxpayers evade taxes through the use of sham trusts and foundations,” said Deputy Attorney General Cole.  “Rest assured, the days of bank secrecy for U.S. tax cheats in Switzerland – and around the world – are numbered.”

“This plea sends a strong message to those who use or help others use offshore bank accounts to evade U.S. taxes,” said Assistant Attorney General Keneally.  “We are receiving information from a variety of sources and are committed to investigating and prosecuting this wrongdoing.”

“We will continue to investigate and prosecute banks and individuals who assist U.S. citizens in the evasion of income taxes with overseas accounts,” said U.S. Attorney Boente.  “The doors are quickly closing on this illegal activity.”

“Assisting American taxpayers to evade their tax obligations with the use of secret bank accounts held in sham entities violates the law, and we will find those who are doing it,” said Chief of IRS-Criminal Investigation Richard Weber.  “IRS-CI will pursue those who use anonymous offshore accounts to avoid paying their fair share.  IRS Criminal Investigation is proud to have shared our hallmark expertise in following the money trail in this and other increasingly sophisticated criminal schemes.”

In a statement of facts filed with the plea agreement, Dörig admitted that between 1997 and 2011, while owning and operating a trust company, he engaged in a wide-ranging conspiracy to aid and assist U.S. customers in evading their income taxes by concealing assets and income in secret bank accounts held in the names of sham entities at a financial institution referred to in the superseding indictment as International Bank (IB), one of the biggest banks in Switzerland and one of the largest wealth managers in the world.

According to the statement of facts, from 1972 to 1996, Dörig worked for a subsidiary of IB.  The subsidiary formed, managed and maintained nominee tax haven entities.  Individuals concealed their assets by holding their accounts at IB in the names of these tax haven entities.  During this time, the subsidiary managed and maintained over 100 sham entities for U.S. taxpayers committing tax evasion.

Also included in the statement of facts, in 1997, executives at the subsidiary devised a plan to spin off all of these sham entities into a new trust company, Dörig Partner AG, to be owned and operated by Dörig, who was then an employee of the subsidiary.  Dörig was required to make his best efforts to keep the existing accounts at IB open and to ensure that any clients referred to him by IB would open new accounts at that institution.

According to the statement of facts, IB promoted Dörig Partner as a provider of various entity structures.  The phone list used in IB’s New York representative office identified Dörig Partner as an external trust expert.  Dörig Partner also sublet space from IB in an office tower where a private bank owned by IB was the major tenant.

As part of the conspiracy, Dörig traveled to the United States to introduce himself to new clients he had obtained as part of the spin-off.  In the following years, he traveled to the United States with bankers from IB, including his co-defendants Markus Walder, Marco Parenti-Adami and Michele Bergantino, to meet with existing and prospective clients who already had undeclared accounts at IB but had been identified by the IB’s bankers as potential candidates for the use of a structure.

According to the statement of facts, although Dörig ostensibly controlled both the structure and the account at IB, in practice, many of the U.S. taxpayers with undeclared accounts controlled the assets in those accounts by dealing directly with IB bankers, often without either the knowledge or consent of Dörig.

According to the statement of facts, in 2008, IB ordered Dörig Partner to close accounts for the structures they managed.  Dörig turned to an asset manager at a financial services firm in Zurich for assistance.  The financial services firm maintained a master account in its own name at a private bank in Gibraltar, and then opened sub-accounts for Dörig’s clients at that bank to which Dörig transferred the funds from the clients’ undeclared accounts at IB.  The financial services firm provided the Gibraltar bank only with the number associated with each sub-account and did not inform the bank of any information regarding the owners of the assets in the sub-accounts.

This case is being investigated by IRS-Criminal Investigation.  Assistant U.S. Attorney Mark D. Lytle and Trial Attorneys Mark F. Daly and Nanette L. Davis of the Tax Division are prosecuting the case.

IRS GIVES OPINION OF VIRTUAL CURRENCY LIKE BITCOIN

FROM:  THE INTERNAL REVENUE SERVICE 
IRS Virtual Currency Guidance: Virtual Currency Is Treated as Property for U.S. Federal Tax Purposes; General Rules for Property Transactions Apply 

WASHINGTON – The Internal Revenue Service today issued a notice providing answers to frequently asked questions (FAQs) on virtual currency, such as Bitcoin. These FAQs provide basic information on the U.S. federal tax implications of transactions in, or transactions that use, virtual currency.

In some environments, virtual currency operates like “real” currency -- i.e., the coin and paper money of the United States or of any other country that is designated as legal tender, circulates, and is customarily used and accepted as a medium of exchange in the country of issuance -- but it does not have legal tender status in any jurisdiction.

The notice provides that virtual currency is treated as property for U.S. federal tax purposes.  General tax principles that apply to property transactions apply to transactions using virtual currency.  Among other things, this means that:

• Wages paid to employees using virtual currency are taxable to the employee, must be reported by an employer on a Form W-2, and are subject to federal income tax withholding and payroll taxes.
• Payments using virtual currency made to independent contractors and other service providers are taxable and self-employment tax rules generally apply.  Normally, payers must issue Form 1099.
• The character of gain or loss from the sale or exchange of virtual currency depends on whether the virtual currency is a capital asset in the hands of the taxpayer.
• A payment made using virtual currency is subject to information reporting to the same extent as any other payment made in property.

FORMER PRESIDENT RUSSIAN STEEL PRODUCER SUBSIDIARY INDICTED FOR HIDING ASSETS IN SWISS BANK ACCOUNTS

FROM:  U.S. JUSTICE DEPARTMENT 
Department of Justice
Office of Public Affairs

FOR IMMEDIATE RELEASE
Friday, March 21, 2014
Former President of Russian Steel Producer’s U.S. Subsidiary Indicted for Hiding Assets in Secret Swiss Bank Accounts

Victor Lipukhin, formerly a resident of St. Charles, Ill., was indicted yesterday by a federal grand jury in Kansas City, Mo., for attempting to interfere with the administration of the internal revenue laws and filing false tax returns, the Justice Department and Internal Revenue Service (IRS) announced today.  The charges relate to Lipukhin hiding millions of dollars in several Swiss bank accounts held at UBS AG.  

According to the indictment, Lipukhin formerly served as president of Severstal Inc. (USA), a subsidiary of AO Severstal, the largest steel producer in Russia.  He lived in St. Charles from at least 2001 through mid-2007.

Lipukhin, a Russian citizen and former lawful permanent U.S. resident, kept between approximately $4,000,000 and $7,500,000 in assets in two bank accounts with UBS in Switzerland from at least 2002 through 2007.  In 2002, he and another individual opened a UBS bank account in the name of Old Orchard, a sham Bahamian entity.  The account was initially funded with over $47,000,000 transferred into the account from a previously maintained UBS account in the Bahamas.  In 2003, the other individual left the account, leaving Lipukhin as the sole owner and signatory.  Lipukhin also maintained another account at UBS in Switzerland in the name of Lone Star, another sham Bahamian entity.  He directed virtually all transactions in the accounts, typically through a Bahamian national who served as the nominee director of the Old Orchard and Lone Star entities to help conceal Lipukhin’s ownership and control.  However, he failed to report his ownership of these accounts and failed to report any income earned in these accounts on his tax returns.

According to the indictment, in order to further conceal his ownership of the undisclosed UBS accounts, Lipukhin utilized fictitious mortgages through an entity called Dapaul Management, controlled by a Canadian attorney, to conceal his purchase of real estate in the United States with funds from the UBS accounts.  This includes his purchase of a historic building at 18 N. Fourth St, in St. Charles, Ill., for $900,000 in the name of Charlestal LLC, a domestic entity controlled by Lipukhin.  He also transferred funds from his UBS accounts to the Canadian attorney for ultimate transfer to a domestic Charlestal bank account in order to conceal the source of the funds, then used the funds in the Charlestal account to pay for various personal expenses and to withdraw cash for personal use.  Finally, Lipukhin impeded the administration of Internal Revenue laws by attempting to prevent an automobile dealer from filing a Form 8300 – which is required for certain cash transactions over $10,000 – with the IRS in order to report Lipukhin’s cash payment to purchase an automobile.

An indictment merely alleges that a crime has been committed, and a defendant is presumed innocent until proven guilty beyond a reasonable doubt.  If convicted, Lipukhin faces a potential maximum sentence of three years imprisonment on each count.

U.S. citizens and permanent residents are required to report income from any source on their tax returns, regardless of whether the source of the income is inside or outside the United States.  Further, U.S. taxpayers who have an interest in, or signature or other authority over, a financial account in a foreign country with assets in excess of $10,000 are also required to disclose the existence of the account on Schedule B, Part III of an individual income tax return.  They must also disclose the existence of the account by filing a Report of Foreign Bank and Financial Accounts with the U.S. Treasury.

Assistant Attorney General Kathleen Keneally of the Tax Division commended the agents from IRS –Criminal Investigation who investigated the case and Trial Attorney Timothy J. Stockwell of the Tax Division, who is prosecuting the case.

SWISS BANKER PLEADS GUILTY TO CONSPIRACY IN U.S. TAX EVADER CASE

FROM:  U.S. JUSTICE DEPARTMENT 
Wednesday, March 12, 2014
Swiss Banker Pleads Guilty to Conspiring with U.S. Tax Evaders, Other Swiss Bankers and Bank Management
Defendant Helped U.S. Customers Conceal Assets in Secret Swiss Bank Accounts and Tax Havens

Andreas Bachmann, 56, of Switzerland, pleaded guilty today to conspiring to defraud the Internal Revenue Service (IRS) in connection with his work as a banking and investment adviser for U.S. customers.

Deputy Attorney General James Cole, Assistant Attorney General for the Justice Department’s Tax Division Kathryn Keneally, Acting U.S. Attorney Dana J. Boente for the Eastern District of Virginia and IRS-Criminal Investigation Chief Richard Weber made the announcement after the plea was accepted by U.S. District Judge Gerald Bruce Lee.

“Today’s plea is just the latest step in our wide-ranging investigations into Swiss banking activities and demonstrates the Department of Justice's commitment to global enforcement against those that facilitate offshore tax evasion,” said Deputy Attorney General Cole.  “We fully expect additional developments over the course of the coming months.”

Bachmann was charged in a one-count superseding indictment on July 21, 2011, and faces a maximum penalty of five years in prison when he is sentenced on Aug. 8, 2014.

In a statement of facts filed with the plea agreement, Bachmann admitted that between 1994 and 2006, while working as a relationship manager in Switzerland for a subsidiary of an international bank, he engaged in a wide-ranging conspiracy to aid and assist U.S. customers in evading their income taxes by concealing assets and income in secret Swiss bank accounts.

As part of that conspiracy, Bachmann traveled to the United States twice each year to provide banking services and investment advice to his U.S. customers.  As a matter of practice, prior to traveling to the United States, Bachmann notified his executive management, including the head of the subsidiary’s private bank in Zurich and the chief executive officer of the subsidiary, of the planned trip and its objectives.

Although Bachmann had been informed of limitations under U.S. law on his ability to provide investment advice to U.S. account holders regarding U.S. securities, the highest ranking executive at the subsidiary was aware that Bachmann was violating U.S. law.  According to the statement of facts, Bachmann was effectively told by the chief executive officer for the subsidiary, “Mr. Bachmann, you know what we expect of you, don’t get caught.”

According to the statement of facts, Bachmann also engaged in cash transactions while traveling in the United States.  In the course of arranging meetings with U.S. customers, some clients would request that Bachmann either provide them with cash as withdrawals from their undeclared accounts or take cash from them as a deposit to their undeclared accounts.  As part of that process, Bachmann agreed to receive cash from U.S. customers and used that cash to pay withdrawals to other U.S. clients.  In one instance, Bachmann received $50,000 in cash from one U.S. customer in New York City and intended to deliver the money to another U.S. client in Southern Florida.  Airport officials in New York discovered the cash but let Bachmann keep the money after questioning him.  The client in Florida refused to take the money after the client learned about the questioning by New York airport officials, and Bachmann returned to Switzerland with the $50,000 in cash in his checked baggage.  Bachmann advised the executive management of the subsidiary about the incident with the cash.

Bachmann also understood that a number of his U.S. customers concealed their ownership and control of foreign financial accounts by holding those accounts in the names of nominee tax haven entities, or structures, which were frequently created in the form of foreign partnerships, trusts, corporations or foundations.

Bachmann dealt with Josef Dӧrig, a co-defendant, regarding the formation and/or maintenance of structures for U.S. customers, among others.  In approximately 1997, the international bank instructed Dӧrig to form his own company specializing in the formation and management of nominee tax haven entities because it was “too risky” to have Dörig perform that work from inside the international bank.  The international bank then directed the subsidiary and others to use Dӧrig and his Swiss trust company, Dӧrig Partner AG, as the preferred choice for the formation and management of structures.

This case is being investigated by IRS-Criminal Investigation.  Assistant U.S. Attorney Mark D. Lytle and Tax Division Trial Attorneys Mark F. Daly, Nanette L. Davis and Jason Poole are prosecuting the case.

IRS ISSUES ANNUAL REPORT ON CRIMINAL INVESTIGATIONS

FROM:  INTERNAL REVENUE SERVICE 
IRS Criminal Investigation Issues Annual Report 
IR-2014-18, Feb. 24, 2014

WASHINGTON – The Internal Revenue Service  announced the release of its IRS Criminal Investigation (CI) Annual Report for fiscal year 2013, reflecting significant increases in enforcement actions against tax criminals and a robust rise in convictions, including identity theft.

CI investigates potential criminal violations of the Internal Revenue Code and related financial crimes in a manner to foster confidence in the tax system and compliance with the law.

High points of fiscal year 2013 include a 12.5 percent increase in investigations initiated compared to the prior year and a nearly 18 percent gain in prosecution recommendations. Specifically, CI initiated 5,314 cases and recommended 4,364 cases for prosecution. These increases were accomplished at a time when agent resources decreased more than 5 percent.

Meanwhile, convictions rose more than 25 percent compared to the prior year. The conviction rate for fiscal 2013 was 93 percent.

“The conviction rate is especially important because it reflects the quality of our case work, our teamwork with law enforcement partners and the U.S. Attorneys’ Offices, and it represents an increase over 2011 and 2012,” said Richard Weber, Chief of Criminal Investigation.

CI continues to play a vital role in the fight against identity theft. CI initiated over 1,400 investigations and recommended prosecution of over 1,250 individuals who were involved in identity theft crimes during fiscal 2013.

As an active partner in over 35 Identity Theft Task Forces, CI works side-by-side with federal, state and local law-enforcement agencies to combat the threat of this insidious crime. One of those task forces, the Tampa Bay Identity Theft Alliance, was recently recognized as the "2013 Task Force of the Year," a national award given by the International Association of Financial Crimes Investigators for investigative excellence and outstanding public service. The Tampa Bay Identity Theft Alliance was formed last year and comprises of 20 Tampa Bay federal, state and local law enforcement agencies and prosecutors.

 “The Alliance represents true teamwork by all levels of law enforcement,” Weber said. “Individuals who commit identity theft demonstrate a blatant disregard of the integrity of the United States tax system and cause immeasurable hardship to innocent victims.”

 In addition, the 36-page report summarizes a wide variety of IRS CI activity on a range of tax crimes, money laundering, public corruption, terrorist financing and narcotics trafficking financial crimes during the fiscal year ending Sept. 30, 2013.

 “Our cases involved individuals and corporations from all segments of society. They led us into corporate board rooms, offices of public officials, tax preparation businesses, identity theft gangs and narcotics trafficking organizations,” Weber said.

 "This report highlights some of the many noteworthy cases that were completed by CI, which is just the tip of the iceberg of the complex cases we completed this past year,” Weber added. “The dedication and enthusiasm of our employees was a driving force behind these achievements. IRS-CI continues to make our mark in history as the best financial investigators in the world."

JUSTICE ANNOUNCES RESULTS OF ANTI-TAX REFUND FRAUD EFFORTS

FROM:  U.S. JUSTICE DEPARTMENT 
Monday, February 24, 2014

Justice Department Highlights Efforts to Combat Stolen Identity Tax Refund Fraud
Today, the Justice Department announced the results of its ongoing efforts to combat tax refund fraud that involves identity theft.  The Tax Division, in conjunction with the Internal Revenue Service (IRS) and U.S. Attorneys’ Offices (USAOs) nationwide, has prioritized the investigation and prosecution of individuals who engage in stolen identity refund fraud (SIRF).  According to the IRS, from 2008 through May 2012, the IRS identified more than 550,000 taxpayers who have had their identities stolen for the purpose of claiming false refunds in their names.  In fiscal year 2013, the department filed more than 580 indictments or informations charging more than 880 defendants with SIRF-related crimes.

SIRF is the use of stolen or otherwise wrongfully acquired personal identification information to file a fraudulent claim with the IRS for a tax refund.  These crimes occur when a social security number, or list of numbers, is stolen or bought; a false tax return showing a refund due is filed electronically, usually at the beginning of filing season before the legitimate taxpayer has filed for the year; and the refund is loaded to a prepaid card, sent to a bank account or mailed to an address accessible by those involved in the scheme.

The actual implementation of SIRF schemes is often complex to carry out.  In an increasing number of cases, the identities are stolen or bought in one place; the returns are electronically filed from another location, often through difficult to trace Wi-Fi connections; refunds are directed to a distant location; checks are cashed in yet another location; and the currency then moves again.

“The Department of Justice is committed to constant vigilance in investigating and prosecuting SIRF crimes,” said Assistant Attorney General Kathryn Keneally for the Justice Department’s Tax Division.  “Too often the victims of identity theft are the most vulnerable in our communities – those whose identities are stolen from medical services or nursing homes, or grieving families who learn that the identities of deceased loved ones have been fraudulently used – and all honest taxpayers are victims when wrongful refund claims are paid out.  We are determined to work with the IRS to stop this crime at the door, and to seek the conviction and punishment of these criminals.”

Some of the prosecutions from 2013 that resulted in significant prison sentences for SIRF crimes include:

• Vernon Harrison , a corrupt U.S. Postal Service mail carrier, was sentenced to serve 111 months in prison in October 2013.  According to court documents, tax refunds were placed on debit cards and mailed to addresses on Harrison’s postal route in Montgomery, Ala., which he then stole from the mail and provided to a co-conspirator in exchange for cash.

• Lea’Tice Phillips worked for an Alabama state agency and had access to databases that contained personal identifying information.  As alleged in court documents, Phillips conspired with Antoinette Djonret and others to file false tax returns using identities stolen from the database.  In total, Djonret filed over 1,000 false tax returns that claimed over $1.7 million in fraudulent tax refunds.  Djonret was sentenced in February 2013 to serve 12 years in prison, and Phillips was sentenced in September 2013 to serve 94 months in prison.

• Angela Myers operated “Angie’s Tax Service,” a tax preparation business located in Baton Rouge, La.  According to court documents, Myers electronically filed false claims for refunds using the names and social security numbers of identity theft victims, many of whom were nursing home patients.  Myers was sentenced to serve 132 months in prison in July 2013.

• Leslie Brewster , a tax return preparer from Durham, N.C., was sentenced to serve 70 months in prison.  According to court documents, Brewster was the manager of a branch office of a tax preparation franchise called Nothing But Taxes, and purchased personal identifying information to claim false dependents on tax returns she prepared for clients.

• Quentin Collick and Deatrice Williams were sentenced in November 2013 to serve 85 and 51 months in prison, respectively.  Corey Thompson, a co-conspirator, was sentenced to serve 30 months in jail.  Williams worked for a debt collection company and stole the identities of a number of individuals, then provided the stolen information to Collick, her son-in-law.  Thompson worked as an independent contractor for a cable company installing cable and internet access for customers.  To conceal the filing of the false tax returns, Thompson used his specialized knowledge and equipment to shut down and hijack his customers' internet service, and, along with Collick, filed false tax returns using the customers' internet access.  Thompson and Collick then directed the fraudulent tax refunds to be placed on pre-paid debit cards.

In 2014, the department has continued to pursue numerous prosecutions against SIRF criminals.  On Jan. 24, 2014, a jury convicted current and former corrections officers of identity theft and tax fraud; according to court documents and evidence presented at trial, the pair accessed a state prison database and used the stolen identity information to file false tax returns.  A check casher was sentenced to 37 months in prison on Jan. 16, 2014, for cashing refund checks in the names of individuals who did not authorize him to cash the checks, according to court documents.  A nursing home employee was convicted by a jury on Jan. 14, 2014, of conspiracy, aggravated identity theft and other SIRF-related crimes; according to court documents and the evidence presented at trial, she stole the identity information of nursing home patients and used that information to create false tax returns.  An Alabama man pleaded guilty on Jan. 13, 2014, for his role in a SIRF fraud.  According to court documents, he obtained stolen identities from an Alabama state employee, used those identities to file false tax returns, and recruited a bank employee to assist him in having the false tax refunds deposited into various bank accounts.  A social worker pleaded guilty on Jan. 10, 2014, to identity theft and tax fraud charges.  According to court documents, she illegally obtained the identifying information of her clients – minors and disabled adults who may have been abused or neglected – and sold that information to others who used the stolen identities to claim as false dependents on fraudulent tax returns they prepared.

"We're fighting identity theft head-on at the IRS and making substantial progress with the help of the Justice Department and local law enforcement," said Commissioner John Koskinen for the IRS.  "We're stopping more identity theft before these fraudulent refunds go out the door.  The IRS initiated nearly 1,500 identity theft related criminal investigations last year, an increase of 66 percent over 2012.  Fighting fraud is an ongoing battle as identity thieves continue to create new ways of stealing personal information.  The IRS is continually reviewing our policies to strengthen our systems, minimize the incidence of identity theft and help victims.

The sentences imposed against those committing SIRF crimes are significant and reflect the seriousness of these crimes.  The Justice Department is committed to investigating and prosecuting tax refund fraud that involves identity theft, and will continue to work with the IRS, FBI, U.S. Secret Service, U.S. Postal Inspection Service, other federal law enforcement agencies as well as state and local law enforcement agencies to combat SIRF-related crimes.  Each U.S. Attorney’s Office has a point of contact to coordinate SIRF matters for its district.

The IRS has taken steps to detect and prevent the fraud before it occurs.  For example, the IRS has designed new software filters to spot false returns before they are processed and before a refund is issued.  The IRS has also expanded efforts to place identity-theft indicators on taxpayer accounts to track and manage identity-theft incidents.

IRS ISSUES WARNING REGARDING TAX SCAMS FOR 2014

FROM:  INTERNAL REVENUE SERVICE 
IRS Releases the “Dirty Dozen” Tax Scams for 2014; Identity Theft, Phone Scams Lead List

WASHINGTON — The Internal Revenue Service today issued its annual “Dirty Dozen” list of tax scams, reminding taxpayers to use caution during tax season to protect themselves against a wide range of schemes ranging from identity theft to return preparer fraud.

The Dirty Dozen listing, compiled by the IRS each year, lists a variety of common scams taxpayers can encounter at any point during the year. But many of these schemes peak during filing season as people prepare their tax returns.

"Taxpayers should be on the lookout for tax scams using the IRS name,” said IRS Commissioner John Koskinen. “These schemes jump every year at tax time. Scams can be sophisticated and take many different forms. We urge people to protect themselves and use caution when viewing e-mails, receiving telephone calls or getting advice on tax issues.”

Illegal scams can lead to significant penalties and interest and possible criminal prosecution. IRS Criminal Investigation works closely with the Department of Justice (DOJ) to shutdown scams and prosecute the criminals behind them.

The following are the Dirty Dozen tax scams for 2014:

Identity Theft

Tax fraud through the use of identity theft tops this year’s Dirty Dozen list. Identity theft occurs when someone uses your personal information, such as your name, Social Security number (SSN) or other identifying information, without your permission, to commit fraud or other crimes. In many cases, an identity thief uses a legitimate taxpayer’s identity to fraudulently file a tax return and claim a refund.

The agency’s work on identity theft and refund fraud continues to grow, touching nearly every part of the organization. For the 2014 filing season, the IRS has expanded these efforts to better protect taxpayers and help victims.

The IRS has a special section on IRS.gov dedicated to identity theft issues, including YouTube videos, tips for taxpayers and an assistance guide. For victims, the information includes how to contact the IRS Identity Protection Specialized Unit. For other taxpayers, there are tips on how taxpayers can protect themselves against identity theft.

Taxpayers who believe they are at risk of identity theft due to lost or stolen personal information should contact the IRS immediately so the agency can take action to secure their tax account. Taxpayers can call the IRS Identity Protection Specialized Unit at 800-908-4490. More information can be found on the special identity protection page.

Pervasive Telephone Scams

The IRS has seen a recent increase in local phone scams across the country, with callers pretending to be from the IRS in hopes of stealing money or identities from victims.

These phone scams include many variations, ranging from instances from where callers say the victims owe money or are entitled to a huge refund. Some calls can threaten arrest and threaten a driver’s license revocation. Sometimes these calls are paired with follow-up calls from people saying they are from the local police department or the state motor vehicle department.

Characteristics of these scams can include:

Scammers use fake names and IRS badge numbers. They generally use common names and surnames to identify themselves.
Scammers may be able to recite the last four digits of a victim’s Social Security Number.
Scammers “spoof” or imitate the IRS toll-free number on caller ID to make it appear that it’s the IRS calling.
Scammers sometimes send bogus IRS emails to some victims to support their bogus calls.
Victims hear background noise of other calls being conducted to mimic a call site.
After threatening victims with jail time or a driver’s license revocation, scammers hang up and others soon call back pretending to be from the local police or DMV, and the caller ID supports their claim.

In another variation, one sophisticated phone scam has targeted taxpayers, including recent immigrants, throughout the country. Victims are told they owe money to the IRS and it must be paid promptly through a pre-loaded debit card or wire transfer. If the victim refuses to cooperate, they are then threatened with arrest, deportation or suspension of a business or driver’s license. In many cases, the caller becomes hostile and insulting.

If you get a phone call from someone claiming to be from the IRS, here’s what you should do: If you know you owe taxes or you think you might owe taxes, call the IRS at 1.800.829.1040. The IRS employees at that line can help you with a payment issue – if there really is such an issue.

If you know you don’t owe taxes or have no reason to think that you owe any taxes (for example, you’ve never received a bill or the caller made some bogus threats as described above), then call and report the incident to the Treasury Inspector General for Tax Administration at 1.800.366.4484.

If you’ve been targeted by these scams, you should also contact the Federal Trade Commission and use their “FTC Complaint Assistant” at FTC.gov.  Please add "IRS Telephone Scam" to the comments of your complaint.

Phishing

Phishing is a scam typically carried out with the help of unsolicited email or a fake website that poses as a legitimate site to lure in potential victims and prompt them to provide valuable personal and financial information. Armed with this information, a criminal can commit identity theft or financial theft.

If you receive an unsolicited email that appears to be from either the IRS or an organization closely linked to the IRS, such as the Electronic Federal Tax Payment System (EFTPS), report it by sending it to phishing@irs.gov.

It is important to keep in mind the IRS does not initiate contact with taxpayers by email to request personal or financial information. This includes any type of electronic communication, such as text messages and social media channels. The IRS has information online that can help you protect yourself from email scams.

False Promises of “Free Money” from Inflated Refunds

Scam artists routinely pose as tax preparers during tax time, luring victims in by promising large federal tax refunds or refunds that people never dreamed they were due in the first place.

Scam artists use flyers, advertisements, phony store fronts and even word of mouth to throw out a wide net for victims. They may even spread the word through community groups or churches where trust is high. Scammers prey on people who do not have a filing requirement, such as low-income individuals or the elderly. They also prey on non-English speakers, who may or may not have a filing requirement.

Scammers build false hope by duping people into making claims for fictitious rebates, benefits or tax credits. They charge good money for very bad advice. Or worse, they file a false return in a person's name and that person never knows that a refund was paid.

Scam artists also victimize people with a filing requirement and due a refund by promising inflated refunds based on fictitious Social Security benefits and false claims for education credits, the Earned Income Tax Credit (EITC), or the American Opportunity Tax Credit, among others.

The IRS sometimes hears about scams from victims complaining about losing their federal benefits, such as Social Security benefits, certain veteran’s benefits or low-income housing benefits. The loss of benefits was the result of false claims being filed with the IRS that provided false income amounts.

While honest tax preparers provide their customers a copy of the tax return they’ve prepared, victims of scam frequently are not given a copy of what was filed. Victims also report that the fraudulent refund is deposited into the scammer’s bank account. The scammers deduct a large “fee” before cutting a check to the victim, a practice not used by legitimate tax preparers.

The IRS reminds all taxpayers that they are legally responsible for what’s on their returns even if it was prepared by someone else. Taxpayers who buy into such schemes can end up being penalized for filing false claims or receiving fraudulent refunds.

Taxpayers should take care when choosing an individual or firm to prepare their taxes. Honest return preparers generally: ask for proof of income and eligibility for credits and deductions; sign returns as the preparer; enter their IRS Preparer Tax Identification Number (PTIN); provide the taxpayer a copy of the return.

Beware: Intentional mistakes of this kind can result in a $5,000 penalty.

Return Preparer Fraud

About 60 percent of taxpayers will use tax professionals this year to prepare their tax returns. Most return preparers provide honest service to their clients. But, some unscrupulous preparers prey on unsuspecting taxpayers, and the result can be refund fraud or identity theft.

It is important to choose carefully when hiring an individual or firm to prepare your return. This year, the IRS wants to remind all taxpayers that they should use only preparers who sign the returns they prepare and enter their IRS Preparer Tax Identification Numbers (PTINs).

The IRS also has a web page to assist taxpayers. For tips about choosing a preparer,  details on preparer qualifications and information on how and when to make a complaint, visit www.irs.gov/chooseataxpro.

Remember: Taxpayers are legally responsible for what’s on their tax return even if it is prepared by someone else. Make sure the preparer you hire is up to the task.

IRS.gov has general information on reporting tax fraud. More specifically, you report abusive tax preparers to the IRS on Form 14157, Complaint: Tax Return Preparer. Download Form 14157 and fill it out or order by mail at 800-TAX FORM (800-829-3676). The form includes a return address.

Hiding Income Offshore

Over the years, numerous individuals have been identified as evading U.S. taxes by hiding income in offshore banks, brokerage accounts or nominee entities and then using debit cards, credit cards or wire transfers to access the funds. Others have employed foreign trusts, employee-leasing schemes, private annuities or insurance plans for the same purpose.

The IRS uses information gained from its investigations to pursue taxpayers with undeclared accounts, as well as the banks and bankers suspected of helping clients hide their assets overseas. The IRS works closely with the Department of Justice (DOJ) to prosecute tax evasion cases.

While there are legitimate reasons for maintaining financial accounts abroad, there are reporting requirements that need to be fulfilled. U.S. taxpayers who maintain such accounts and who do not comply with reporting requirements are breaking the law and risk significant penalties and fines, as well as the possibility of criminal prosecution.

Since 2009, tens of thousands of individuals have come forward voluntarily to disclose their foreign financial accounts, taking advantage of special opportunities to comply with the U.S. tax system and resolve their tax obligations. And, with new foreign account reporting requirements being phased in over the next few years, hiding income offshore is increasingly more difficult.

At the beginning of 2012, the IRS reopened the Offshore Voluntary Disclosure Program (OVDP) following continued strong interest from taxpayers and tax practitioners after the closure of the 2011 and 2009 programs. The IRS works on a wide range of international tax issues with DOJ to pursue criminal prosecution of international tax evasion. This program will be open for an indefinite period until otherwise announced.

The IRS has collected billions of dollars in back taxes, interest and penalties so far from people who participated in offshore voluntary disclosure programs since 2009. It is in the best long-term interest of taxpayers to come forward, catch up on their filing requirements and pay their fair share.

Impersonation of Charitable Organizations

Another long-standing type of abuse or fraud is scams that occur in the wake of significant natural disasters.

Following major disasters, it’s common for scam artists to impersonate charities to get money or private information from well-intentioned taxpayers. Scam artists can use a variety of tactics. Some scammers operating bogus charities may contact people by telephone or email to solicit money or financial information. They may even directly contact disaster victims and claim to be working for or on behalf of the IRS to help the victims file casualty loss claims and get tax refunds.

They may attempt to get personal financial information or Social Security numbers that can be used to steal the victims’ identities or financial resources. Bogus websites may solicit funds for disaster victims. The IRS cautions both victims of natural disasters and people wishing to make charitable donations to avoid scam artists by following these tips:

To help disaster victims, donate to recognized charities.
Be wary of charities with names that are similar to familiar or nationally known organizations. Some phony charities use names or websites that sound or look like those of respected, legitimate organizations. IRS.gov has a search feature, Exempt Organizations Select Check, which allows people to find legitimate, qualified charities to which donations may be tax-deductible.
Don’t give out personal financial information, such as Social Security numbers or credit card and bank account numbers and passwords, to anyone who solicits a contribution from you. Scam artists may use this information to steal your identity and money.
Don’t give or send cash. For security and tax record purposes, contribute by check or credit card or another way that provides documentation of the gift.
Call the IRS toll-free disaster assistance telephone number (1-866-562-5227) if you are a disaster victim with specific questions about tax relief or disaster related tax issues.

False Income, Expenses or Exemptions

Another scam involves inflating or including income on a tax return that was never earned, either as wages or as self-employment income in order to maximize refundable credits. Claiming income you did not earn or expenses you did not pay in order to secure larger refundable credits such as the Earned Income Tax Credit could have serious repercussions. This could result in repaying the erroneous refunds, including interest and penalties, and in some cases, even prosecution.

Additionally, some taxpayers are filing excessive claims for the fuel tax credit. Farmers and other taxpayers who use fuel for off-highway business purposes may be eligible for the fuel tax credit. But other individuals have claimed the tax credit although they were not eligible. Fraud involving the fuel tax credit is considered a frivolous tax claim and can result in a penalty of $5,000.

Frivolous Arguments

Promoters of frivolous schemes encourage taxpayers to make unreasonable and outlandish claims to avoid paying the taxes they owe. The IRS has a list of frivolous tax arguments that taxpayers should avoid. These arguments are wrong and have been 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.

Those who promote or adopt frivolous positions risk a variety of penalties.  For example, taxpayers could be responsible for an accuracy-related penalty, a civil fraud penalty, an erroneous refund claim penalty, or a failure to file penalty.  The Tax Court may also impose a penalty against taxpayers who make frivolous arguments in court.  

Taxpayers who rely on frivolous arguments and schemes may also face criminal prosecution for attempting to evade or defeat tax. Similarly, taxpayers may be convicted of a felony for willfully making and signing under penalties of perjury any return, statement, or other document that the person does not believe to be true and correct as to every material matter.  Persons who promote frivolous arguments and those who assist taxpayers in claiming tax benefits based on frivolous arguments may be prosecuted for a criminal felony.

Falsely Claiming Zero Wages or Using False Form 1099

Filing a phony information return is an illegal way to lower the amount of taxes an individual owes. Typically, a Form 4852 (Substitute Form W-2) or a “corrected” Form 1099 is used as a way to improperly reduce taxable income to zero. The taxpayer may also submit a statement rebutting wages and taxes reported by a payer to the IRS.

Sometimes, fraudsters even include an explanation on their Form 4852 that cites statutory language on the definition of wages or may include some reference to a paying company that refuses to issue a corrected Form W-2 for fear of IRS retaliation. Taxpayers should resist any temptation to participate in any variations of this scheme. Filing this type of return may result in a $5,000 penalty.

Some people also attempt fraud using false Form 1099 refund claims. In some cases, individuals have made refund claims based on the bogus theory that the federal government maintains secret accounts for U.S. citizens and that taxpayers can gain access to the accounts by issuing 1099-OID forms to the IRS. In this ongoing scam, the perpetrator files a fake information return, such as a Form 1099 Original Issue Discount (OID), to justify a false refund claim on a corresponding tax return.

Don’t fall prey to people who encourage you to claim deductions or credits to which you are not entitled or willingly allow others to use your information to file false returns. If you are a party to such schemes, you could be liable for financial penalties or even face criminal prosecution.

Abusive Tax Structures

Abusive tax schemes have evolved from simple structuring of abusive domestic and foreign trust arrangements into sophisticated strategies that take advantage of the financial secrecy laws of some foreign jurisdictions and the availability of credit/debit cards issued from offshore financial institutions.

IRS Criminal Investigation (CI) has developed a nationally coordinated program to combat these abusive tax schemes. CI's primary focus is on the identification and investigation of the tax scheme promoters as well as those who play a substantial or integral role in facilitating, aiding, assisting, or furthering the abusive tax scheme (e.g., accountants, lawyers).  Secondarily, but equally important, is the investigation of investors who knowingly participate in abusive tax schemes.

What is an abusive scheme? The Abusive Tax Schemes program encompasses violations of the Internal Revenue Code (IRC) and related statutes where multiple flow-through entities are used as an integral part of the taxpayer's scheme to evade taxes.  These schemes are characterized by the use of Limited Liability Companies (LLCs), Limited Liability Partnerships (LLPs), International Business Companies (IBCs), foreign financial accounts, offshore credit/debit cards and other similar instruments.  The schemes are usually complex involving multi-layer transactions for the purpose of concealing the true nature and ownership of the taxable income and/or assets.

Form over substance are the most important words to remember before buying into any arrangements that promise to "eliminate" or "substantially reduce" your tax liability.  The promoters of abusive tax schemes often employ financial instruments in their schemes.  However, the instruments are used for improper purposes including the facilitation of tax evasion.

The IRS encourages taxpayers to report unlawful tax evasion. Where Do You Report Suspected Tax Fraud Activity?

Misuse of Trusts

Trusts also commonly show up in abusive tax structures. They are highlighted here because unscrupulous promoters continue to urge taxpayers to transfer large amounts of assets into trusts. These assets include not only cash and investments, but also successful on-going businesses. There are legitimate uses of trusts in tax and estate planning, but the IRS commonly sees highly questionable transactions. These transactions promise reduced taxable income, inflated deductions for personal expenses, the reduction or elimination of self-employment taxes and reduced estate or gift transfer taxes. These transactions commonly arise when taxpayers are transferring wealth from one generation to another. Questionable trusts rarely deliver the tax benefits promised and are used primarily as a means of avoiding income tax liability and hiding assets from creditors, including the IRS.

IRS personnel continue to see an increase in the improper use of private annuity trusts and foreign trusts to shift income and deduct personal expenses, as well as to avoid estate transfer taxes. As with other arrangements, taxpayers should seek the advice of a trusted professional before entering a trust arrangement.

The IRS reminds taxpayers that tax scams can take many forms beyond the “Dirty Dozen,” and people should be on the lookout for many other schemes. More information on tax scams is available at IRS.gov.

IRS REPORTS INCREASED TAX FILINGS SO FAR IN 2014

FROM:  INTERNAL REVENUE SERVICE 
Filing Season 2014 Begins with More Returns Filed

WASHINGTON — The IRS today announced that tax filings in 2014 have outpaced filings for the same time last year. As of Feb. 7, the IRS received 27.3 million returns, up 2.5 percent compared to the same time last year. Electronically filed returns account for almost 96 percent of those filed so far this year.

Taxpayers, either through tax preparers or from their home computers, have e-filed more than 26 million returns so far this year, up almost 4 percent compared to the same time last year. As of Feb. 7, taxpayers have filed more than 13 million returns from home computers, an increase of 14.7 percent compared to the same period last year.

Refunds are up for 2014, with almost 19.5 million issued this year, an increase of more than 18 percent compared to the same time last year. The average refund as of Feb. 7 is $3,317, up 4.6 percent compared to the same time last year. (Refund averages generally have higher dollar values early in the filing season than later in the year.)

Most refunds are directly deposited into taxpayer accounts; just over 87 percent of all refunds issued were directly deposited as of Feb. 7. 2014.

MEMBERS APPROVED FOR TAXPAYER ADVOCACY PANEL

FROM:  INTERNAL REVENUE SERVICE 
Taxpayer Advocacy Panel Members Selected

WASHINGTON — The Internal Revenue Service recommended and the Department of Treasury approved the selection of 27 new members to serve on the nationwide Taxpayer Advocacy Panel (TAP). The TAP is a federal advisory committee charged with providing taxpayer suggestions to improve IRS customer service.

The new TAP members will join 46 returning members to round out the panel of 73 volunteers for 2014. The new members were selected from more than 400 interested individuals from across the country who applied during an open recruitment period last spring or the pool of alternate members who applied in prior years.

"TAP member volunteers are counted on to recognize important taxpayer issues and bring them to our attention,” said IRS Commissioner John Koskinen. “Their work and advice help the IRS serve the nation’s taxpayers.”

The TAP listens to taxpayers, identifies issues and makes suggestions for improving IRS service and customer satisfaction. Oversight and program support for the TAP are provided by the Taxpayer Advocate Service, an independent organization within the IRS that helps resolve taxpayer problems and makes recommendations to avoid future problems.

“To meet the needs of the taxpaying public, it is critical that the IRS listen to taxpayers to hear what their needs and preferences are,” said Nina E. Olson, National Taxpayer Advocate. “The citizen volunteers who serve on the TAP are, first and foremost, taxpayers who bring a taxpayer perspective to bear in advising on the IRS’s taxpayer service activities.”

TAP members work with IRS executives on priority topics, primarily those involving the Wage & Investment and Small Business/Self-Employed operating divisions. Members also serve as a conduit for bringing grassroots concerns raised by the taxpaying public to the attention of the IRS.

TAP members are U.S. citizens who volunteer to serve a three-year appointment and are expected to devote 200 to 300 hours per year to panel activities. TAP members are demographically and geographically diverse, providing balanced representation from all 50 states, the District of Columbia and Puerto Rico.

FARMER SENTENCED IN FARM SUBSIDY FRAUD CASE

FROM:  JUSTICE DEPARTMENT 
Friday, February 7, 2014
New Mexico Farmer Sentenced to Prison for Tax Fraud, Fraudulently Collecting Farm Subsidies

Bill Melot, a farmer from Hobbs, N.M., was sentenced to serve 14 years in prison today to be followed by three years of supervised release for tax evasion, program fraud and other crimes, the Justice Department, Internal Revenue Service (IRS) and U.S. Department of Agriculture’s (USDA) Office of Inspector General announced today.  Melot was also ordered to pay $18,469,998 in restitution to the IRS and $226,526 to the USDA.

Melot was previously convicted of tax evasion, failure to file tax returns, making false state ments to the USDA and i mpeding the IRS following a four-day jury trial in Albuquerque, N.M.  According to court documents and evidence presented at trial and at sentencing, Melot has not filed a personal inco me tax return since 1986, and owes the IRS more than $25 million in federal taxes and more than $7 million in taxes to the state of Texas.  In addition, Melot has i mproperly collected more than $225,000 in federal farm subsidies from the USDA by furnishing false infor mation to the agency.  Specifically, Melot provided the USDA with a false Social Security nu mber (SSN) and a fictitious e mployer identi fication nu mber (EIN) to collect federal farm aid.

According to court documents and evidence presented at trial, Melot took nu merous steps to conceal his ownership of 250 acres in Lea County, N.M., including notarizing forged deeds and titling the property in the na me of no minees.  The evidence also showed that Melot used false SSNs and fictitious EINs to hide his assets from the IRS.  Additionally, Melot maintained a bank account with Nordfinanz Zurich, a Swiss financial institution, which he set up in Nassau, Baha mas, in 1992, and failed to report the account to the U.S. Treasury Depart ment as required by law.

Assistant Attorney General Kathryn Keneally for the Justice Department’s Tax Division and Acting U.S. Attorney Steven C. Yarbrough for the District of New Mexico co mmended the investigative efforts of IRS - Cri minal Investigation and the USDA’s Office of Inspector General, as well as Tax Division Trial Attorney Jed Silvers mith and Assistant U.S. Attorney George Kraehe, who prosecuted the case.  Assistant Attorney General Keneally and Acting U.S. Attorney Yarbrough also thanked the Cri minal Investigation Division of the Texas Co mptroller of Public Accounts for assistance in prosecuting this matter.

IRS WARNS OF TAX SCAMS USING IRS NAME

FROM:  INTERNAL REVENUE SERVICE 
WASHINGTON — With the start of the 2014 tax season approaching on Jan. 31, the Internal Revenue Service urged taxpayers to be aware that tax-related scams using the IRS name proliferate during this time of year.

Tax scams can take many forms, with perpetrators posing as the IRS in everything from e-mail refund schemes to phone impersonators. The IRS warned taxpayers to be vigilant of any unexpected communication that is purportedly from the IRS at the start of tax season.

The IRS encourages taxpayers to be on the lookout for phone and email scams that use the IRS as a lure. The IRS does not initiate contact with taxpayers by email to request personal or financial information. This includes any type of electronic communication, such as text messages and social media channels. The IRS also does not ask for personal identification numbers (PINs), passwords or similar confidential access information for credit card, bank or other financial accounts. Recipients should not open any attachments or click on any links contained in the message.

USING FICTITIOUS POWERS OF ATTORNEY LANDS MAN IN JAIL FOR TAX REFUND FRAUD

FROM:  JUSTICE DEPARTMENT
Thursday, January 16, 2014

Check Casher Sentenced to Jail for Involvement in Fraudulent Tax Refund Scheme
David Haigler of Montgomery County, Ala., was sentenced today to serve 37 months in federal prison for his involvement in a stolen identity tax refund fraud scheme, Assistant Attorney General Kathryn Keneally of the Justice Department's Tax Division, U.S. Attorney George L. Beck Jr. for the Middle District of Alabama and the Internal Revenue Service (IRS) announced today.  Haigler was also ordered to serve three years of supervised release and to pay restitution to the IRS in the amount of $606,781.  Haigler previously pleaded guilty in the U.S. District Court for the Middle District of Alabama on Sept. 6, 2013.

According to court documents, between November 2011 and July 2012, Haigler obtained 263 fraudulent U.S. Treasury refund checks and Refund Anticipation Loan checks totaling $606,781.  The refund checks were in the names of different individuals and those individuals did not authorize Haigler to cash the checks.  Haigler obtained fictitious powers of attorney in the names of the individuals on the checks, which purportedly appointed Haigler to handle financial affairs, including the cashing of checks.  Haigler cashed all of the fraudulent refund checks at a store in Millbrook, Ala., and provided the store with copies of the fictitious powers of attorney.  Haigler retained a portion of the checks and provided the remainder to the individuals who brought him the fraudulent checks.

This case was investigated by special agents of the IRS - Criminal Investigation and the U.S. Secret Service.  Trial Attorneys Michael Boteler and Jason Poole of the Tax Division and Assistant U.S. Attorney Todd Brown prosecuted the case.

JUSTICE COLLECTS OVER $8 BILLION FROM CASES IN FISCAL 2013

FROM:  JUSTICE DEPARTMENT 
Thursday, January 9, 2014
Justice Department Collects More Than $8 Billion in Civil and Criminal Cases in Fiscal Year 2013

Attorney General Eric Holder today announced that the Justice Department collected at least $8 billion in civil and criminal actions in the fiscal year ending Sept. 30, 2013.

“The department’s enforcement actions not only help to ensure justice is served, but also deliver a valuable return to the American people,” said Attorney General Holder.  “It is critical that Congress provide the resources necessary to match the department’s mounting caseload.  As these figures show, supporting our federal prosecutors is a sound investment.”

The statistics indicate that in FY 2013, approximately $5.9 billion was collected by the department’s litigating divisions and the U.S. Attorneys’ offices in individually and jointly handled civil actions.  The largest civil collections were from affirmative civil enforcement cases, in which the United States recovered government money lost to fraud or other misconduct and collected fines imposed on individuals and/or corporations for violations of federal health, safety, civil rights or environmental laws.  This number includes approximately $3.2 billion related to health care fraud and more than $430 million related to environmental cases.  In addition, civil debts were collected on behalf of several federal agencies, including the Department of Housing and Urban Development, the Department of Health and Human Services, the Internal Revenue Service, the Small Business Administration and the Department of Education.

The Justice Department’s litigating divisions and U.S. Attorneys’ offices are also responsible for enforcing and collecting criminal debts owed to the U.S. and criminal debts owed to federal crime victims.  In FY 2013, the total amount collected in criminal actions totaled approximately $2.2 billion in restitution, criminal fines and felony assessments.  This total included more than $450 million in criminal fines associated with health care fraud, more than $600 million in antitrust violation fines, more than $390 million in fines for environmental violations and more than $42 million in fines for tax fraud violations.

The approximately $8.1 billion taken in by the department as a whole in FY 2013 represents nearly three times the approximately $2.76 billion of the department’s direct appropriations that pay for the 94 U.S. Attorneys’ offices and its main litigating divisions.

The total includes all monies collected as a result of Justice Department-led enforcement actions and negotiated civil settlements.   It includes more than $5.48 billion in payments made directly to the Justice Department, and $2.61 billion in indirect payments made to other federal agencies, states and other designated recipients.

In measuring collections recovered in FY 2013, this figure necessarily includes some cases that were resolved in previous years but the proceeds of which were collected in FY 2013.      

FY 2013 Collections Highlights



Health Care Fraud - Abbott, Amgen (Civil Division; U.S. Attorneys Offices)



As in previous years, the largest collections related to health care fraud.   For example, the Justice Department collected more than $800 million of its total $1.5 billion settlement with Abbott Laboratories resolving criminal and civil allegations that Abbott illegally promoted the drug Depakote to treat agitation and aggression in elderly dementia patients and schizophrenia when neither of these uses was approved as safe and effective by the FDA.   Of the total, Abbott paid a $500 criminal fine in FY 2012 following its guilty plea (the total $1.5 billion settlement also includes nearly $200 million in forfeited assets).   In another major pharmaceutical case, the U.S. collected more than $748 million from its total $762 million settlement (including $14 million in forfeited assets) with biotech giant Amgen Inc. to settle allegations including Amgen’s illegal promotion of Aranesp, a drug used to treat anemia, in doses not approved by the FDA and for off-label use to treat non-anemia-related conditions.   For details, see Abbott , Abbott sentencing , and Amgen .

Deepwater Horizon (Criminal Division; Environment and Natural Resources Division; Civil Division; U.S. Attorneys Offices)

Among other major collections in FY 2013 were penalties and fines collected from BP Exploration and Production Inc., and Transocean Deepwater Inc., stemming from their roles in the disastrous April 2010 Deepwater Horizon rig explosion in the Gulf of Mexico that cost 11 men their lives and resulted in the largest oil spill in U.S. history.

Out of the $4 billion total criminal settlement with BP, the U.S. collected $256 million in criminal fines in FY 2013 following January 2013 convictions for manslaughter, obstruction of justice and environmental crimes.  The U.S. will recover an additional $1 billion in criminal fines from the resolution over the next four years under the court schedule.  An additional $2.39 billion in non-fine criminal penalties is dedicated to environmental and wildlife conservation efforts in the Gulf, as well as $350 million in spill prevention and response efforts.  During FY 2013, BP made initial payments of $105 million towards these additional obligations, and will pay the rest over the next four years, under the court’s schedule.

In FY 2013, the department collected $100 million in criminal fines owed by Transocean for its role in the oil spill.  Transocean also paid $60 million towards an additional $300 million in non-fine criminal penalties slated for Gulf conservation, spill prevention and response efforts, and it paid $404 million of $1 billion in civil penalties imposed under the Clean Water Act.

The efforts to hold accountable those responsible for the disaster continue.  For details, see BP and Transocean settlements.

Price Fixing and Bid Rigging – AU Optronics (Antitrust Division)

Some of the department’s largest collections related to the Antitrust Division’s criminal prosecutions of international conspiracies to fix prices, rig bids and allocate markets.  For example, in FY 2013, the Justice Department collected more than $326 million from its total of $1.39 billion in criminal fines resulting from its investigation into price fixing of thin-film transistor liquid crystal display (LCD) panels.   For instance, $250 million was collected in FY 2013 from LCD manufacturer AU Optronics’ $ 500 million total fine for its conviction after an eight-week trial .  For details, see LCD .  In addition, the United States collected more than $124 million in criminal fines in FY 2013 related to the department’s ongoing investigation into price fixing and bid rigging in the automotive parts industry, out of a total of more than $1.6 billion in fines obtained in the investigation through FY 2013.  For details, see Auto Parts .

Tax Conspiracy – Wegelin & Co. (Tax Division)

The U.S. collected more than $42 million in restitution and fines in a single tax case involving Wegelin & Co., a Swiss private bank that pleaded guilty to conspiring with U.S. taxpayers and others to hide more than $1.2 billion in secret Swiss bank accounts and the income generated in these accounts from the Internal Revenue Service (IRS).   As part of its guilty plea, Wegelin agreed to pay approximately $20 million in restitution to the IRS and to pay a $22.05 million fine.  In addition, Wegelin agreed to the civil forfeiture of an additional $15.8 million, representing the gross fees earned by the bank on the undeclared accounts of U.S. taxpayers.

NATIONAL TAXPAYER ADVOCATE DELIVERS REPORT TO CONGRESS

FROM:  INTERNAL REVENUE SERVICE 
National Taxpayer Advocate Delivers Annual Report to Congress; Focuses on Taxpayer Bill of Rights and IRS Funding

WASHINGTON — National Taxpayer Advocate Nina E. Olson today released her 2013 annual report to Congress, urging the Internal Revenue Service to adopt a comprehensive Taxpayer Bill of Rights – a step she said would increase trust in the agency and, more generally, strengthen its ability to serve taxpayers and collect tax. The Advocate also expressed deep concern that the IRS is not adequately funded to serve taxpayers, pointing out that the IRS annually receives more than 100 million telephone calls from taxpayers and that, in fiscal year 2013, the IRS could only answer 61 percent of calls from taxpayers seeking to speak with an IRS customer service representative.

“The year 2013 was a very challenging one for the IRS. Because of sequestration, the IRS’s funding was substantially cut, which translated into a reduction in taxpayer service,” Olson said in releasing the report. “Public trust in its fairness and impartiality was called into question because of reports the IRS subjected certain applicants for tax-exempt status to greater review based on political-sounding names. And because of the 16-day government shutdown, the agency could not complete preparations for the upcoming tax filing season on time, delaying the date on which taxpayers can first file returns and claim refunds.”

Olson continued: “From challenges can come opportunities, and this report presents a ‘21st century vision’ designed to meet taxpayer needs and enhance voluntary tax compliance.”

TAXPAYER BILL OF RIGHTS RECOMMENDED

The report reiterates the Advocate’s longstanding recommendation that the IRS adopt a Taxpayer Bill of Rights (TBOR). In a prior report, Olson analyzed the IRS’s processing of applications for tax-exempt status and concluded its procedures violated eight of the ten taxpayer rights she has proposed. Today’s report argues that the rationale for a TBOR is much broader.

“Taxpayer rights are central to voluntary compliance,” the report says. “If taxpayers believe they are treated, or can be treated, in an arbitrary and capricious manner, they will mistrust the tax system and be less likely to comply with the laws voluntarily. If taxpayers have confidence in the fairness and integrity of the system, they will be more likely to comply.”

The report emphasizes that the U.S. tax system is built on voluntary compliance. Ninety-eight percent of all tax revenue the IRS collects is paid timely and voluntarily. Only 2 percent results from IRS enforcement actions. For the taxpayer, voluntary compliance means not having to face IRS enforcement. For the government, voluntary compliance is cheapest, because enforced compliance requires the IRS to devote resources to detecting and collecting amounts that are not voluntarily reported or paid.

While arguing that knowledge of taxpayer rights promotes voluntary compliance, the report cites a survey of U.S. taxpayers conducted for TAS in 2012 that found less than half of respondents believed they have rights before the IRS and only 11 percent said they knew what those rights are.

“The Internal Revenue Code provides dozens of real, substantive taxpayer rights,” the report says. “However, these rights are scattered throughout the Code and are not presented in a coherent way. Consequently, most taxpayers have no idea what their rights are and therefore often cannot take advantage of them.”

The report calls on the IRS to take the taxpayer rights that already exist and group them into ten broad categories, modeled on the U.S. Constitution’s Bill of Rights. The report says the “simplicity and clarity” of a thematic, principle-based Taxpayer Bill of Rights would help taxpayers understand their rights in general terms.

“A Taxpayer Bill of Rights would serve as an organizing principle for tax administrators in establishing agency goals and performance measures, provide foundational principles to guide IRS employees in their dealings with taxpayers, and provide information to taxpayers to assist them in their dealings with the IRS,” the report says.

The ten rights the Advocate is proposing are detailed in the report. Olson has been in discussions with senior IRS officials about publishing a TBOR, and TAS has just completed a series of focus groups with taxpayers and preparers to gauge reaction to, and comprehension of, the proposed list. Olson said the IRS has been open to publishing a proposed TBOR, and she will continue to work with the IRS leadership to refine and publish a TBOR during the coming year.

IRS FUNDING INADEQUATE

The report identifies the lack of adequate IRS funding as a top problem for taxpayers. Each year, more than 100 million taxpayers call the IRS for help and millions more visit IRS walk-in sites or send correspondence. Key metrics show the agency is increasingly unable to keep up with taxpayers’ demand for help in complying with their tax obligations.

“The requirement to pay taxes is generally the most significant burden a government imposes on its citizens,” the report says. “The National Taxpayer Advocate believes the government has a practical and moral obligation to make compliance as simple and painless as possible.” The report also points out that federal spending cuts, which are designed to reduce the budget deficit, have the effect of increasing the deficit when applied to the revenue collection agency.

Impact on Taxpayer Service. The report says the IRS’s workload has increased over the past decade, and since FY 2010, IRS funding and staffing have been cut by 8 percent. The report highlights key areas in which the quality of taxpayer service has dropped to unacceptable levels:

Last year, the IRS could only answer 61 percent of calls from taxpayers seeking to speak with a customer service representative (CSR). That’s down from 87 percent ten years earlier, with half the decline occurring since FY 2010. In FY 2013, 39 percent of calls (some 20 million) simply did not get through.
Taxpayers who did get through had to wait on hold approximately 17.6 minutes before speaking with a CSR. That’s up from 2.6 minutes ten years earlier, a nearly six-fold increase, with nearly half the increase occurring since FY 2010.
Millions of taxpayers visit IRS walk-in sites each year for assistance. Ten years ago, the IRS answered some 795,000 tax law questions in the sites during the filing season. Last year, it handled about 110,000 tax law questions during the filing season – a reduction of 86 percent.

The IRS historically has prepared tax returns for taxpayers seeking its help, particularly for low income, elderly, and disabled taxpayers. Ten years ago, it prepared some 476,000 returns. That number declined significantly over the decade, and the IRS recently announced it will no longer prepare returns at all.
Last year, the IRS received about 8.4 million letters from taxpayers responding to proposed adjustments to their tax liabilities. As of the end of the fiscal year, 53 percent of taxpayer letters in the IRS’s “adjustments” inventory were considered “over age” (generally, more than 45 days old). That compares with “over age” percentages of 12 percent ten years earlier and 28 percent in FY 2010.
The IRS recently announced it will only answer “basic” tax law questions on its telephone lines and in its walk-in sites during the upcoming filing season and it will not answer any tax law questions after the filing season, including questions from the millions of taxpayers who obtain filing extensions and prepare their returns later in the year.

Olson made clear that the deficiencies in taxpayer service are attributable primarily to a lack of resources. Regardless of cause, she wrote, “it is a sad state of affairs when the government writes tax laws as complex as ours – and then is unable to answer any questions beyond ‘basic’ ones from baffled citizens who are doing their best to comply.”

The Advocate expressed particular concern about the magnitude and impact of cuts to the IRS’s training budget. Since FY 2010, the IRS’s training budget has been cut from $172 million to $22 million. “If IRS customer service representatives are not well trained, taxpayers calling for help are more likely to receive incorrect information or no information,” the report says. “If IRS enforcement employees are not well trained, auditors may make inappropriate adjustments and assessments, and collection employees may issue inappropriate levies or file inappropriate liens.”

Impact on Voluntary Compliance and Revenue Collection. The report notes that the cuts to IRS funding since FY 2010 have been made as part of across-the-board reductions to federal discretionary spending designed to reduce the budget deficit. But “the logic behind budget cuts simply does not apply to the funding of the IRS,” the report says. The IRS collected $255 for each $1 it received in appropriated funds in FY 2013. “If the Chief Executive Officer of a Fortune 500 company were told that each dollar allocated to his company’s Accounts Receivable Department would generate multiple dollars in return,” the report says, “it is difficult to see how the CEO would keep his job if he chose not to provide the department with the funding it needed. Yet that is essentially what has been happening with respect to IRS funding for years.”

Olson said IRS funding is shortchanged because the federal budget rules treat the IRS the same way they treat all spending programs – with no “credit” given for the revenue it collects.  “This procedure makes little sense when applied to the IRS,” she wrote. “For virtually every other spending program, a dollar spent is just that – it increases the deficit by one dollar. But a dollar spent on the IRS generates substantially more than one dollar in return – it reduces the budget deficit.”

The report reiterates the Advocate’s longstanding recommendation that the relevant congressional committees work together to develop new procedures to fund the IRS, with the goal of maximizing tax compliance, particularly voluntary compliance, with due regard for protecting taxpayer rights and minimizing taxpayer burden.

OTHER KEY ISSUES ADDRESSED

Federal law requires the Annual Report to Congress to identify at least 20 of the “most serious problems” encountered by taxpayers and to make administrative and legislative recommendations to mitigate those problems. Overall, this year’s report identifies 25 problems, makes dozens of recommendations for administrative change, makes five recommendations for legislative change, and analyzes the 10 tax issues most frequently litigated in the federal courts.

Among the “most serious problems" addressed are the following:

Need for Return Preparer Oversight. In 2002, the National Taxpayer Advocate began advocating for regulation of unenrolled tax preparers to protect taxpayers from incompetent and unscrupulous preparers. In 2011, the IRS began implementing regulations to register, test, and require continuing education for unenrolled preparers. In 2013, a U.S. District Court invalidated regulations governing the IRS’s testing and continuing education requirements, holding that they exceeded the authority of the Treasury Department to impose absent authorizing legislation. If the district court’s decision is upheld on appeal, the Advocate urges the IRS to adopt a multi-pronged strategy to protect taxpayers by pursuing education and enforcement options that are unambiguously within its purview. Of particular note, the Advocate recommends that the IRS give unenrolled preparers an opportunity to earn a voluntary testing and continuing education certificate and limit the ability of unenrolled preparers who do not earn the certificate to represent taxpayers in audits of returns they prepare. The Advocate also recommends Congress enact legislation to clarify that the IRS may regulate unenrolled paid preparers directly.

The IRS’s Conceptual Approach Toward Collection of Delinquent Tax Liabilities. The report urges the IRS to fundamentally reassess its traditional approach toward Collection. In her preface to the report, Olson cites third-party studies that often use the number of levies served and liens filed as a measure of the Collection function’s effectiveness. Contrary to this “conventional wisdom,” she notes, IRS Collection revenue actually increased in the aftermath of the IRS Restructuring and Reform Act of 1998 when the IRS reduced levies served by 94 percent and liens filed by 47 percent. Similarly, she notes that Collection revenue has increased slightly over the last few years, despite a 51 percent reduction in levies since FY 2011 and a 45 percent reduction in liens since FY 2010. Olson says that earlier personal contacts with delinquent taxpayers and more flexible use of payment options for financially struggling taxpayers, such as installment agreements and offers in compromise, would be more effective than increasing the number of levies and liens filed by automation. The report acknowledges that the use of levies, liens, and seizures remains appropriate with respect to taxpayers who can afford to pay their tax liabilities but refuse to do so.

The Impact of the IRS’s Offshore Voluntary Disclosure Programs on Taxpayers Who Make Honest Mistakes. The IRS has sought to increase enforcement of Foreign Bank and Financial Accounts (FBAR) reporting and similar information reporting requirements in recent years and has offered a series of offshore voluntary disclosure (OVD) programs to settle with taxpayers who have failed to file the required forms. However, the report says, the programs impose excessive penalties on taxpayers whose failure to file was not “willful.” Analyzing results from the IRS’s 2009 OVD program, the Advocate found the median offshore penalty was about 381 percent of the additional tax assessed for taxpayers with median-sized account balances, and 580 percent of the tax assessed for taxpayers with the smallest account balances (i.e., the bottom 10 percent, with an average $44,855 account balance). Taxpayers who “opted out” of the OVD program and agreed to subject themselves to audits fared better but still faced penalties of nearly 70 percent of the tax and interest. While FBAR penalties are computed as a percentage of account balances rather than tax liabilities, the report offers the comparison to illustrate that the penalties are often Draconian and may deter other taxpayers from coming into compliance.

New TAS Research Studies on Tax Compliance. Volume 2 of the report contains six research studies, including three that relate directly to tax compliance:

An assessment of accuracy-related penalties imposed on Schedule C filers found that penalties do not increase future reporting compliance.
A comparison of the effectiveness of Revenue Officers (ROs) and the IRS’s Automated Collection System (ACS) in addressing employment tax liabilities found that ROs collected more dollars and resolved delinquencies more quickly than ACS, but neither channel was effective at promoting future tax compliance.
A study regarding tax compliance by sole proprietors found that taxpayer service and social norms were the two most influential factors affecting compliance behavior.  Contrary to expectation, the study found that traditional deterrence theory did not play a role in promoting compliance, possibly because sole proprietors were particularly motivated by short-term cash flow needs.
Volume 2 also contains an analysis designed to further the National Taxpayer Advocate’s 2009 recommendation that the IRS develop a plan and timeline to achieve an accelerated third-party information reporting and document-matching system. The analysis describes the steps that must be taken and the benefits to taxpayers and the IRS of accelerating receipt and processing of third-party information reports, such as Forms W-2 and 1099.

IRS STATISTICS FOR 2011

FROM:  INTERNAL REVENUE SERVICE 
Fall 2013 Statistics of Income Bulletin Now Available

WASHINGTON — The Internal Revenue Service today announced the availability of the Fall 2013 issue of the Statistics of Income Bulletin, which features information on individual income tax returns filed for tax year 2011.

Taxpayers filed 145.4 million individual income tax returns for 2011, an increase of 1.7 percent from tax year 2010. The adjusted gross income (AGI) reported on these returns totaled $8.4 trillion, a 3.5-percent increase from 2010. Taxable income rose 4.4 percent to $5.7 trillion for 2011.

The Statistics of Income (SOI) Division produces the SOI Bulletin on a quarterly basis. Articles included in the publication provide the most recent data available from various tax and information returns filed by U.S. taxpayers. This issue of the SOI Bulletin also includes articles on the following topics:

Partnership Returns:  Since 2002, the number of partnerships has increased at an average annual rate of 4.4 percent. For tax year 2011, a total of 3,285,177 partnerships filed federal tax returns, reporting $20.6 trillion in total assets and $580.9 billion in total net income or profit.

Accumulation and Distribution of Individual Retirement Arrangements:  About three- quarters of all taxpayers (145.6 million) were eligible to contribute to an individual retirement account (IRA) for 2010. Of the 3.5 million taxpayers who made IRA contributions, 62 percent were age 50 or older. For 2010, the end-of-year fair market value of IRAs reported by approximately 54.4 million taxpayers was roughly $5 trillion.

FOUR INDICTED IN FALSE TAX RETURN CONSPIRACY CASE

FROM:  U.S. JUSTICE DEPARTMENT T
Monday, December 23, 2013
Four Minneapolis-based Return Preparers Indicted for Conspiracy, Aggravated Identity Theft, Preparing False Returns

A 63-count superseding indictment charging Chatonda Khofi, Ishmael Kosh, Amadou Sangaray and Francis Saygbay in a conspiracy to defraud the Internal Revenue Service (IRS) was unsealed on Monday, December 23, in Minneapolis, Minn., the Justice Department and IRS announced today.  The superseding indictment was returned by a federal grand jury on Nov. 19, 2013, and alleges that Primetime Tax Services Inc. was a tax return preparation business with three storefronts in the Minneapolis area.  Khofi worked as the Chief Executive Officer of Primetime, and Kosh and Sangaray worked as managers of the Brooklyn Center location of Primetime.  All four named defendants allegedly prepared false tax returns under the name of Primetime.

According to court documents, Khofi, Kosh, Sangaray and Saygbay conspired amongst themselves and with others to prepare and file false individual income tax returns for the customers of Primetime.  Some of these returns reported false dependents, false deductions, false Schedule C business losses and false wage income.  These false entries resulted in fraudulently inflated refunds for their customers.  As part of the scheme, court documents allege that the defendants prepared and filed false Minnesota state income tax returns for their customers that contained the same or similar false information as reported on the federal income tax returns.  From 2007 to 2009, Primetime filed over 2,000 customer federal income tax returns with the IRS.

The indictment further charges each defendant with multiple counts of aggravated identity theft and multiple counts of aiding and assisting in the preparation of false individual income tax returns.  The aggravated identity theft charges stem from the defendants’ alleged use of the names and social security numbers of actual persons to falsely claim as dependents on their customers’ individual income tax returns.

According to the indictment, the defendants also accompanied some customers to check-cashing businesses to cash their falsely inflated tax refund checks, then demanded a portion of the cashed refund check in addition to tax preparation fees already collected.  The indictment alleges that, in some instances, the defendants withdrew cash from debits cards containing their customers’ refunds without permission, again in addition to the tax preparation fees they had already collected.

An indictment is merely an allegation and all defendants are presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law.  If convicted, the defendants face a maximum potential sentence of five years in prison for the conspiracy count and three years in prison for each count of aiding in the preparation of a false tax return.  The aggravated identity theft counts have a mandatory two year sentence.

The case was investigated by special agents of IRS-Criminal Investigation.  It is being prosecuted by Trial Attorneys Dennis Kihm and Thomas Flynn of the Justice Department's Tax Division.

IRPAC ISSUES RECOMMENDATIONS ON TAX ISSUES TO IRS COMMISSIONER

FROM:  U.S. INTERNAL REVENUE SERVICE 
IRPAC Issues Annual Report for 2013

WASHINGTON — The Information Reporting Program Advisory Committee (IRPAC) today released its annual report for 2013, including numerous recommendations to the Commissioner of Internal Revenue on new and existing issues in tax administration.

“In their report, IRPAC members provide valuable feedback to the IRS on a wide range of information reporting issues,” IRS Acting Commissioner Danny Werfel said. “Committee members have graciously offered their time and expertise. The IRS will carefully consider their recommendations.”

In the 2013 report, IRPAC recommends that IRS:

Extend truncation of taxpayer identification numbers (TINs) to employer identification numbers (EINs)
Expand the TIN matching program to permit matching on a greater number of return types
Improve instructions to reduce errors on Form 1099-MISC and
Provide additional guidance with regard to merchant card reporting on Form 1099-K
The committee also commented on cost basis reporting for debt instruments, specifically addressing requirements, practices and capabilities for reporting market premium and discount. There are also extensive discussions of reporting requirements under the Foreign Account Tax Compliance Act (FATCA) and the Affordable Care Act.

MAN FACES PRISON SENTENCE, FINE FOR CLAIMING FALSE TAX REFUNDS

FROM:  U.S. JUSTICE DEPARTMENT 
Monday, December 9, 2013
Utah Resident Pleads Guilty to Filing False Claims for Tax Refunds Totaling $653,884

Stanley J. Wardle, 65, of Spanish Fork, Utah, pleaded guilty today in the U.S. District Court in Salt Lake City to nine counts of filing false claims for income tax refunds, the Justice Department and Internal Revenue Service (IRS) announced.  Wardle, who was indicted on Feb. 15, 2012, is scheduled to be sentenced before U.S. District Judge Dee Benson on Feb. 27, 2014.

According to the indictment, on or about Jan. 22, 2009, Wardle prepared and filed a false U.S. Individual Income Tax Return for the year 2008, in which he claimed a tax refund of $32,115.  In addition, between Dec. 8, 2008 and May 13, 2009, he caused additional false claims for tax refunds to be made on behalf of others.  In total, Wardle was involved in false claims for refunds totaling $653,884.

Wardle faces a statutory maximum sentence of five years in prison and a fine of up to $250,000 or twice the gross gain or loss caused by the defendant for each false claim charge.

Assistant Attorney General Kathryn Keneally for the department’s Tax Division commended the special agents of IRS - Criminal Investigation who investigated the case, and Tax Division Trial Attorneys Michael Romano and Stuart Wexler, who prosecuted the case.

IRS REPORTS MORE THAN 122 MILLION TAX RETURNS e-FILED IN 2013

FROM:  U.S. INTERNAL REVENUE SERVICE 
More than 122 million Returns e-Filed in 2013

WASHINGTON — The Internal Revenue Service today announced a milestone for IRS e-file – more than 122 million returns were e-filed during 2013. The statistics provided today contain complete e-file totals for 2013.

This year, the IRS received more than 45.2 million returns from those who prepared and e-filed their own returns on home computers, up from 43.2 million a year earlier, an increase of 4.6 percent. E-filed returns from tax professionals increased slightly, totaling more than 77 million returns. Whether they are self prepared or prepared by a tax return preparer, 91 percent of all tax returns filed by individuals are prepared on computers using tax preparation software, which improves the accuracy of those returns.

Other highlights from the new filing season statistics show:

During 2013, the IRS issued more than 109 million refunds worth almost $300 billion.
Almost 77 percent of refund recipients chose to receive their refunds through direct deposit.
More people are using IRS.gov to get answers, file their returns and resolve issues. So far in 2013, the IRS web site has been accessed more than 430 million times, up almost 24 percent compared to the same time last year.

OWNER HEALTH CARE COMPANIES SENTENCED TO SERVE 120 MONTHS FOR ROLE IN FRAUD SCHEME

FROM:  U.S. JUSTICE DEPARTMENT 
Thursday, November 21, 2013
Owner of Home Health Companies Sentenced for Role in $20 Million Health Care Fraud Scheme

The owner and operator of several Miami health care agencies was sentenced today to serve 120 months in prison for his role in a health care fraud scheme involving defunct home health care company Trust Care Health Services Inc.

Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division; U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida; Special Agent in Charge Michael B. Steinbach of the FBI’s Miami Field Office; Special Agent in Charge Christopher B. Dennis of the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG) Office of Investigations Miami Office; and Acting Special Agent in Charge Michael J. DePalma of the Internal Revenue Service—Criminal Investigation’s (IRS-CI) Miami Field Office made the announcement.

Roberto Marrero, 60, of Miami, was sentenced by U.S. District Judge K. Michael Moore in the Southern District of Florida.   In September 2013, Marrero pleaded guilty to conspiracy to commit health care fraud and conspiracy to receive and pay health care kickbacks.

Marrero was an owner and operator of Trust Care, a Miami home health care agency that purported to provide home health and physical therapy services to Medicare beneficiaries.

Co-conspirators Sandra Fernandez Viera, 49, Patricia Morcate, 34, and Enrique Rodriguez, 59, all of Miami, have also pleaded guilty to related charges, including conspiracy to commit health care fraud and conspiracy to receive and pay health care kickbacks.   On Nov. 13, 2013, Fernandez Viera was sentenced to serve 120 months in prison; Morcate was sentenced to serve 60 months; and Rodriguez was sentenced to serve 57 months.

Together with Marrero, Fernandez Viera was an owner and operator of Trust Care.   Morcate worked at and was an investor in Trust Care.  Rodriguez served as a patient recruiter on behalf of Trust Care.  

According to court documents, Marrero and his co-conspirators operated Trust Care for the purpose of billing the Medicare Program for, among other things, expensive physical therapy and home health care services that were not medically necessary and/or were not provided.

Marrero primarily controlled Trust Care and, in light of that role, oversaw the schemes operating out of the company.  Marrero was also responsible for negotiating and paying kickbacks and bribes, interacting with patient recruiters, and coordinating and overseeing the submission of fraudulent claims to the Medicare program.

Marrero and his co-conspirators paid kickbacks and bribes to patient recruiters in return for the recruiters providing patients to Trust Care for home health and therapy services that were medically unnecessary and/or not provided.  Marrero and his co-conspirators at Trust Care also paid kickbacks and bribes to co-conspirators in doctors’ offices and clinics in exchange for home health and therapy prescriptions, medical certifications and other documentation.  Marrero and his co-conspirators used these prescriptions, medical certifications and other documentation to fraudulently bill the Medicare program for home health care services, which Marrero knew was in violation of federal criminal laws.

From approximately March 2007 through at least October 2010, Trust Care submitted more than $20 million in claims for home health services.  Medicare paid Trust Care more than $15 million for these fraudulent claims.

Marrero and his co-conspirators have also acknowledged their involvement in similar fraudulent schemes at several other Miami health care agencies in addition to Trust Care with estimated total losses of approximately $50 million.   Those agencies include A&B Health Services Inc. , Centrum Home Health Care Inc., Global Nursing Home Health Inc., Lovable Home Health Services Corp., New Concepts In Health Inc., Nursemed Home Care Corp., R&M Health Care Inc., Ubieta Health System Inc., and Vital Care Home Health Services Inc.

The case was investigated by the FBI and HHS-OIG, with the assistance of IRS-CI, and was brought as part of the Medicare Fraud Strike Force initiative, under the supervision of the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Southern District of Florida. This case was prosecuted by Trial Attorney A. Brendan Stewart of the Criminal Division’s Fraud Section.

Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged more than 1,700 defendants who have collectively billed the Medicare program for more than $5.5 billion.   In addition, HHS’s Centers for Medicare and Medicaid Services, working in conjunction with HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.