Mutual Fund Giant May Be out Billions

America’s largest mutual fund company is facing the possibility of owing the IRS billions of dollars in outstanding federal income tax liabilities. So-called ’whistle blower David Danon, a former tax lawyer for the Vanguard Group, believes that Vanguard owes $34.6 billion from the years of 2007 to 2014 and has submitted a report to the IRS. The case has now been reviewed by tax law veteran Reuven S. Avi-Yonah and everyone in the tax world is taking notice.

What’s the Issue?

Vanguard currently holds nearly 20% of the mutual fund industry’s assets, and have been able to do so by offering lower fees to its investors. Danon claims that the industry giant has been able to do so because they have been underpaying their income taxes. Vanguard argues that they provide similar services to its mutual funds but are able to do so “at cost” and by not taking a profit. These savings are then passed to investors. 

As Danon points out, Vanguard is a for-profit company and should not be able to charge artificially low prices for the services provided by affiliates. 

“A Clear Cut Case” with Vanguard Still Coming out on Top

Since the report was submitted to the IRS, Vanguard executives have had time to review a copy of the report and they believe that it is without merit. Like other professionals in the tax law industry our attorneys at the Scammahorn Law Firm, however, are taking notice.

One well-known New York business tax attorney says that “it seems like a pretty clear cut case”. The case is still under investigation by the IRS and the Securities and Exchange Commission, but as many tax professionals have pointed out, even if Vanguard were to lose the case and be forced to pay penalties, the amount they would pay would be significantly less than the nearly $35 billion they took in over the course of those 7 years.

Tax Issues Are Never Cut and Dry

As straight forward as taxes may seem to some, tax laws are incredibly complex and difficult for individuals without in depth knowledge and experience to navigate. This is why our attorneys at the Scammahorn Law Firm help clients who are facing IRS issues better understand their case, learn what is at stake and begin to build evidence which will reduce or eliminate fines, penalties, or imprisonment.

We welcome your call to discuss your case today at (903) 595-1000.