The Ferraro Law Firm
Washington D.C. — Miami, Florida
For many reasons, large and sophisticated taxpayers take aggressive positions on their tax returns and report taxes due to the IRS, which are significantly less than the amount of tax, they ultimately pay. In one recent case involving pharmaceutical giant GlaxoSmithKline, the company ultimately agreed with the IRS that it had underpaid taxes for a number of years totaling approximately $3.4 billion of tax and interest.
If a person had come forward to the IRS and identified GlaxoSmithKline's underpayment before the IRS did, that person may have been entitled to a cash award of over one billion dollars under the new IRS Whistleblower Rewards program. While the scale of this particular example may be unusual, underpayments of tax in the millions of dollars are common occurrences when talking about large corporations, trusts, partnerships, and/or wealthy individuals.
What exactly are "uncertain tax positions?"
An "uncertain tax position" is an accounting term that relates to an earnings recognition provision for an issue. To recognize income with respect to an issue, a taxpayer must determine if the weight of available evidence indicates it is more likely than not, based on the technical merits, that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. In simplest terms, if a taxpayer thinks that the IRS has a better position than they do on the merits, it is an uncertain tax position. Even though they cannot take the benefit of such positions for financial reporting purposes because they think they will lose if challenged by the IRS, businesses choose to take uncertain tax positions on their income tax returns in order to potentially recognize tax benefits in the future if the IRS does not identify and ultimately prevail on the issue. In addition, the company saves money on their current taxes by reporting a lower amount of tax due on their return.
Confidential Consultations, Nationwide Practice — 1-800-275-3332
If you have information about a company's uncertain tax position, call or contact us directly at our Washington D.C. or Miami, Florida, area offices to discuss this information and how it may entitle you to a significant reward.
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