Whistle blowers May Hit the IRS JackPot

Let's Talk about.......Whistle blowers whom May Hit the IRS Jack Pot
By Alan Orlowsky

Cheating on income taxes is probably as old as income taxes themselves. The IRS encourages people to report tax fraud, making whistle blowers eligible for cash pay outs if the IRS is able to collect from the dead-beat taxpayers.

Blowing the Whistle

The IRS has two programs you may use to report various types of tax fraud, such as non-payment of income, payroll, corporate and other taxes; under-reporting income or revenue; using illegal tax shelters, etc. Although the programs started in 2006-2007, it wasn't until late 2011 when they finally started showing the type of results the IRS was looking for. 

Filing Reports or "Claims" You use the same form (PDF) for each program, but which program you use depends on the amount of money involved.

Large Dollar Amounts What the IRS calls the Whistle blower Rules apply in cases where taxpayers:

• ·    Owe more than $2 million in taxes, penalties and interest
• ·    Are individuals and have an annual gross incomes over $200,000

The IRS will pay you between 15 and 30 percent of the money it collects from the taxpayer if it uses the information you provided.

IRS Collects & Pays Millions. There's no limit or "cap" on the amount of your award in this program. The IRS determines how much you're paid depending on the value of the information you provided and other factors.

As of late 2011 (PDF), the IRS hasn't released final numbers for this program, but 431 taxpayers filed whistle blower claims on over 5,000 taxpayers. In April 2010, the IRS awarded one whistle blower $4.2 million - an accountant who reported his employer.

Right To Appeal. You can file an appeal with the US Tax Court if you don't agree with the amount the IRS awarded to you. The court may leave the award as is, or it may increase it. It all depends on the evidence and reasoning you use to show why the IRS was wrong, as well as on how the IRS explains why it was right.

Smaller Dollar Amounts

The Informant Claims Program is for claims that don't meet the $2 million/$200,000 requirements of the Whistle blower Rules. Again, whether you get an award depends on the quality of information you provide and whether it leads to collection from a taxpayer. There are differences between the two programs, though:

• ·    The IRS doesn't have to give you an award, even if it uses your information and collects from a taxpayer
• ·     Your award may be up to 15 percent of the amount recovered by the IRS
• ·    Your award can't be more than $10 million
• ·    You can't file an appeal with the Tax Court if you disagree with the IRS about your award

IRS Collects & Pays Millions. The IRS has released many more details about this program. In 2010(PDF):

• ·         The IRS received over 7,500 reports or claims from informants
• ·         The IRS collected nearly $500 million from of taxpayers reported 
• ·         About $19 million in awards was paid to informants

Important Details To Remember

No matter which program you use, there are several things you should keep in mind when blowing the whistle on a taxpayer:

1. No Whistle blower Protection. Unlike other federal whistle blower laws, the IRS programs don't protect you from retaliation if you blow the whistle on your employer. In other words, you may be demoted or even fired.

The  laws in your state, however, may give you some whistle blower protection.

2. Your Identity May Not Be Secret. The IRS takes every possible step to keep your name confidential, but it's not always possible. For example, if the IRS needs you to testify at a hearing or some other legal proceeding against the taxpayer you reported, the taxpayer and even the general public may discover your identity. You can report tax fraud and remain anonymous by filing a special form (PDF), but you won't be eligible for an award.

3. Crime Doesn't Pay. The IRS may reduce your award or maybe even deny it completely if you had anything to do with creating the tax problems you reported. This may happen, for example, when you report your employer and you had a hand at preparing the employer's taxes or keeping financial or other records.

4. Awards Are Taxable. You have to pay taxes on any award you get from the IRS, just like any other prize or award. The taxes can be hefty, too. For example, after the IRS deducted federal income taxes on the accountant's $4.2 million award, he actually received $3.24 million. He paid 28 percent in taxes.

In many states, you'll have to pay state income taxes on the award, too.

5. It's A Slow Process. It may take five to seven years, maybe longer, before the IRS pays an award. The IRS investigations take time, and the taxpayers often fight the IRS in court.

When it comes to reporting tax fraud, doing the "right thing" may bring you more than a sense of pride and satisfaction. It could very well lead to a big payday for you. Be careful to follow the rules when filing your report and be wary of the potential pitfalls, and your efforts may payoff.

If you have questions about this post or about a particular legal situation, please contact Alan Orlowsky by calling 847-325-5559, or visit our website: http://www.orlowskywilson.com

The Many Benefits of Life Insurance in Estate Planning

Lets Talk About.........The Many Benefits of Life Insurance in Your Estate Planning

By Alan Orlowsky

Life insurance is a contract between an insured (insurance policy holder)and an insurer or assurer, where the insurer promises to pay a designated beneficiary a sum of money (the "benefits") upon the death of the insured person. Depending on the contract, other events such as terminal illness or critical illness may also trigger payment. The policy holder typically pays a premium, either regularly or as a lump sum. Other expenses (such as funeral expenses) are also sometimes included in the benefits. Source: http://en.wikipedia.org/wiki/Life_insurance

 Many of my clients are in the process of building wealth but it may be years before they realize the fruits of their investments or labors. If such a client dies prematurely, life insurance can be used to create wealth immediately for heirs and loved ones. Here are 10 ways to accomplish the creation of wealth, using this unique asset of Life Insurance within your estate plan.

Life Insurance can be used to accomplish any of the following:

1. The creation of an estate where circumstances have kept the estate owner from accumulating sufficient assets to care for his loved ones in the event of a premature death.

2. To protect a business value due to the loss of key employees.

3. For debt reduction. Personal and business loans can be paid off with life insurance proceeds.

4. To equalize inheritance. Most estates are made up of various illiquid assets and the liquidity nature of death benefit proceeds allows for equalization among children.

5. Accelerated death benefit. Terminally ill individuals can receive a portion of their death benefit prior to death on an income tax free basis to pay for medical bills, and other expenses and/or to prevent dying destitute.

6. To pay for death taxes and/or estate settlement costs. These costs can exceed 50% of the fair market value of an estate.

7. Pay off a home mortgage.

8. Fund a business transfer. Many businesses have multiple stockholders. Life insurance proceeds upon the death of one stockholder provide ready cash to finance the transaction.

9. To replace charitable gifts. If large assets are gifted to charity there are fewer dollars that can pass as an inheritance. Life insurance can replace that lost inheritance.

10. To supplement retirement funding. Certain life insurance products can supplement retirement funding by accumulating additional funds for retirement years.


Of course the amount of the inheritance can be tailored to the needs and wants of a particular person. Where one person might feel comfortable leaving a sum of $100,000, another might want to leave an inheritance in the millions. Generally speaking, either goal can be achieved.

Many taxable estates do not have sufficient liquidity (cash) to pay estate taxes within nine months after death. Clearly, estate assets could be sold to the detriment of the beneficiaries, and if the market for those assets is strong, this might be a satisfactory solution. On the other hand, if the market is down or if the people charged with selling the assets do not appreciate their true value, a sale could result in devastation of the estate value.

Therefore, life insurance (if structured properly) can provide the estate with immediate liquidity to buy time and flexibility for the executor and heirs to determine the best course of action. Life insurance proceeds guarantee that the assets can be sold in an orderly manner, including holding the assets to a later date if the market is in a slump.

The amount of life insurance needed will depend on a variety of factors including:

• How the insurance is to be used
• Whether or not you own a business and your plans for its succession
• Whether or not you have a taxable estate
• The liquidity of your assets
• Your age and current earning capacity
• And many more.

Your advisory team, using detailed financial modeling and reasonable assumptions, can help you quantify the amounts needed for these various coverage needs. Your life insurance agent or financial planner may have software that helps with these calculations as well.

Should you have questions regarding more benefits to of Life Insurance in Estate Planning contact Alan Orlowsky by calling 847-325-5559 or visit our website: http://www.orlowskywilson.com

Why do I need a living Will?

Let's Talk About.....Why You Need a Living Will
By Alan Orlowsky

Most of us have had the same nightmare. We are slowly dying in a hospital bed, tubes going in and out, being kept alive by beeping machines. Worse yet, we are unable to communicate our wishes to our caregivers and the loved ones gathered around. No one knows what we want.

The way to prevent this nightmare from becoming reality is a living will. A living will is completely different from a conventional will or living trust used to leave property at the time of your death. A living will applies only to healthcare.

What Is a Living Will?

A living will is a document in which you describe the kind of healthcare you want to receive if you are incapacitated and cannot speak for yourself, due to illness, injury or advanced age. It is sometimes called a healthcare declaration, a directive to physicians, a healthcare directive or a medical directive.

 A living will is a gift not only to yourself, but also to your family. It can be gut-wrenching for family members to have to make end-of-life decisions on your behalf when they don’t know what you’d want.

In a living will, you can include any wishes you have for medical care. You can ask that certain types of care always be given, or instruct that certain types of care never be given – or anything in between. Take some time to carefully define the circumstances that make you comfortable. You can revoke a living will at any time by simply destroying the document.

Do You Want to Keep Living, Regardless?

Living will documents will ask if you want to receive treatments that will prolong your life, but will not make you better. Such procedures usually include transfusions of blood and blood products, cardiopulmonary resuscitation (CPA), diagnostic tests, dialysis, administration of drugs (other than for pain), use of a respirator and surgery.

Do You Want To Be Fed by Tube?

A living will should address the administration of fluids and nutrients via intravenous feeding or tubes. People who are comatose or near death cannot feed themselves. With artificial hydration and feeding, a permanently comatose person can live for years. A terminally ill person can take much longer to die.

What If You Are in Pain?

A living will should address palliative care. Palliative care keeps a patient comfortable and free from pain until life ends naturally. It is especially important when a patient has rejected life-prolonging treatments, fluids and nutrition. Palliative care does not try to cure an illness or condition, or to prolong life. Palliative care can be administered at home, in a hospice facility or at a hospital.

How Do I Make a Living Will?

Living will templates are readily available. After you complete your written document, you must sign it and have it witnessed or notarized, or both, depending on the law in the state where you live. Give copies to family members, your healthcare agent, your doctors and your hospital or care facility.

A living will is often paired with a power of attorney for healthcare, in which you name an agent to make healthcare decisions on your behalf. Some states combine these two kinds of documents into one, called an advanced healthcare directive.

Call Orlowsky & Wilson today to discuss your options.

The law surrounding appropriate use of a living will can be complicated. Plus, the laws in each state and the facts in each case are unique. This article provides a brief, general introduction to the topic. It is not legal advice. For more detailed information about your specific situation, call us today.

If you have questions about this post or about a particular legal situation, please contact Alan Orlowsky by calling 847-325-5559 or visit our website http://www.orlowskywilson.com