September 12, 2013 — The Internal Revenue Service (IRS) Whistleblower Office was created by the Tax Relief and Health Care Act of 2006 to allow whistleblowers to notify the government about tax cheats and receive compensation. Under the Act, tipsters are permitted to share as much as 30 percent of the amount the IRS recoups based on unique information relating to tax fraud. Compensation for tips about a private individual’s tax violations may be awarded only when the taxpayer’s gross income is more than $200,000 for every taxable year involved and the government recovers over $2 million. Rewards for tips concerning a corporation’s tax crimes do not depend upon the amount of the recovery.
Chiropractor Sentenced for Tax Evasion Hid Assets in Out-of-State Company
The U.S. Department of Justice (DOJ) and the IRS have announced that Douglas R. Madsen, a Utah chiropractor, has been sentenced to prison for 33 months and ordered to pay more than $500,000 to the IRS as restitution for evasion of federal income taxes.
For the tax periods of 1995 and 1999 to 2004, Madsen failed to pay $1.3 million in tax, interest and penalties. According to the DOJ, Madsen allegedly failed to file tax returns or to pay taxes. Madsen attempted to hide his assets by transferring his business and real property to trusts and then creating a Washington state corporation, Grand Scale, Inc., to which Madsen’s real estate was transferred.
As a result of the failure to pay taxes, the IRS assessed a $100,000 levy against Madsen’s chiropractic office. When Madsen attempted to sell his chiropractic business, he told a prospective purchaser that the IRS levy was invalid, and that the purchaser could pay the $100,000 to Madsen, instead of the IRS.
In 2009, Madsen was summoned by the IRS to answer questions in court concerning his businesses and assets. When he failed to appear, he was held in contempt. As of the date of trial in 2012, Madsen’s total debt had grown to $1.7 million due to additional interest charges. Following a trial in Utah federal court, Madsen was convicted of one count of tax evasion.
Tax Fraud Often Revealed by Company Insiders
When business owners cheat the government by engaging in tax fraud, the odds are good that insider employees will discover it, regardless of whether they are asked to participate. Before informants step forward to collaborate with the IRS, however, they should learn how the process works. The IRS tax fraud lawyers with Waters & Kraus provide conscientious informants with the sound legal counsel they’re entitled to. Contact us by email or speak with our whistleblower attorneys at 855.784.0268 to learn more about how we can work together to fight tax fraud.