DC Law Firm Spearheads USD4 Billion In Whistleblower Tax Claims

by Glen Shapiro, LawAndTax-News.com, New York

15 January 2008

In the year since the creation of the Internal Revenue Service's 'Whistleblower' Office, more than USD4 billion in alleged under-payments of tax to the US Treasury has been taken up by one law firm alone specialising in such cases.

The firm in question, the Washington DC-based Ferraro Law Firm, made its announcement last week as it prepared to take on a tax whistleblower submission of more than $600 million, a claim which comes on the heels of a record breaking $2 billion submission also filed by The Ferraro Law Firm on December 11, 2007.

“We know the IRS has already begun to act on previous tips we have given them, and we hope the information we have provided helps bring the parties responsible for cheating on their taxes to justice,” stated Founding Partner James Ferraro.

According to Ferraro, in this most recent submission, a tax whistleblower has come forward to allege that a household-name company has underpaid its US tax liability by more than USD600 million, by systematically taking aggressive tax positions on its tax returns.

“It is not unusual for a company to have potential tax liabilities running in the hundreds of millions,” explained Tax Partner Scott Knott, before going on to add that: “With this particular company, it has had a pretty good success rate of getting away with many of its tax plays, but it won’t this time."

Tax Partner Greg Lynam observed that: “Unfortunately, many companies, like the company that is the subject of this submission, choose to take many aggressive tax positions, set up a reserve for them on their publicly-filed financial reports, and then hope the IRS misses some of them on audit."

The Ferraro Law Firm’s tax lawyers have reportedly represented some of the world’s largest companies and wealthiest individuals, and many of these cases have resulted in record or near-record multi-million dollar verdicts.

The IRS Whistleblower Office was established by the Tax Relief and Health Care Act of 2006, and processes tip-offs received from individuals who spot tax problems in their workplace.

Rewards worth between 15% and 30% of the total proceeds that IRS collects can be awarded to whistleblowers, if the IRS moves ahead based on the information provided.

By the end of last year, the IRS had received about 80 whistleblower claims, half of which were submitted in the last two and a half months of 2007.

Under new procedures announced last month, to be eligible for an award, the tax, penalties, interest, additions to tax, and additional amounts in dispute, must exceed USD2 million for any taxable year and, if the taxpayer is an individual, the individual’s gross income must exceed USD200,000 for any taxable year in question.

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