Another player in the Bernie Madoff saga has fallen. His longtime auditor, David Friehling, pleaded guilty in federal court on Tuesday to charges of securities fraud, investment adviser fraud, making false filings with the SEC, and obstructing or impeding the administration of the Internal Revenue laws (among others).

Despite the plea, Friehling still told U.S. District Judge Alvin K. Hellerstein, "At no time was I ever aware Bernard Madoff was engaged in a Ponzi scheme."

Lately, the residential real estate market has been perking up. A key driver has been a juicy tax break: the first-time home buyer's tax credit, which comes to $8,000. No doubt, this can make a big difference when making the decision to purchase a home.

In fact, about 1.4 million taxpayers have filed returns to take advantage of the benefit.

This should be a good thing, right? Well, whenever there is a significant tax break, expect a good amount of cheats to get a piece of the action (especially during hard economic times).

There are plenty of nations that allow secretive banking but Switzerland has always been the king-pin of the group and no nation has been a bigger accomplice to decades of criminal activity.

They do this with a sense of pride in a clinical fashion while all the time really having the dirtiest hands in town. The reluctance of the Swiss government and Swiss banks to prevent tyrants, criminals, politicians, aristocrats, and your run-of-the-mill tax evading businessperson from hiding their money is solely for the purpose of financial gain absent any scruples at all.

Yesterday the Internal Revenue Service came to an agreement with the Swiss government to turn over the names of 4,450 U.S. clients with UBS AG (NYSE: UBS) accounts suspected of tax evasion.

If I could be reincarnated, I would come back as a banker. The world revolves around them. They get multi-million dollar bonuses, live in Fifth Avenue apartments, own spreads in Greenwich, CT, and summer in seaside cottages in the Hamptons. When their money-making schemes go awry, taxpayers bail them out -- and even pay their bonuses!

But we already knew that. What I did not know, until I read this, is that banks also get the kid glove treatment from the Internal Revenue Service (IRS) when it comes to audits. In fiscal 2008, the financial services industry got audited at a 9% rate -- less than half the 19% audit rate for all other industries that fiscal year.

Is banking getting off easy because it's so much more virtuous? Not at all. In fact, recent IRS audits reveal that banks under-report taxable income at a far higher rate than IRS audits of the four other industry groups. And this doesn't even include Swiss banks like UBS (NYSE: UBS) which have been helping clients dodge U.S. taxes for years -- it just paid $780 million in fines for those sins.

A lot of observers have been complaining that federal bailouts of failed financial institutions have been too generous.

Now the Washington Mutual's holding company is making exact opposite claim, suing the Federal Deposit Insurance Corporation. The company claims that the fire sale to JPMorgan Chase (NYSE: JPM) violated its rights, arguing that a more orderly liquidation would have provided greater value to the company's constituents.

If the allegations are to be believed, Robert Allen Stanford ripped off his investors to the tune of $8 billion and managed to cheat the IRS out of its cut of his ill-gotten gains as well.

The IRS has asked a judge to allow it to continue its efforts to collect $226.6 million in back taxes -- and there may be more to come because Stanford still hasn't filed his 2007 tax return.

Maybe I'm naive in the ways of massive fraud and its tax implications, but here's what I don't understand: Thousands of investors are in all probability out billions of dollars because of Mr. Stanford's alleged conduct. Given that, every penny that the IRS collects from him represents a penny that won't be available to his victims.

Early this morning, Swiss bank UBS (NYSE: UBS) announced that it lost $1.02 billion more than it earlier reported -- thanks to a recent settlement with U.S. authorities. A write-down of assets transferred to the Swiss National Bank also contributed to the wider-than-reported loss.

According to MarketWatch, UBS's loss totaled 20.89 billion francs compared to its earlier reported loss of 19.7 billion francs. UBS's CEO added that the bank's balance sheet is still vulnerable to "illiquid and volatile markets," leaving its earnings "at risk for some time to come."

American International Group (NYSE: AIG), in yet another act of self-parody replacing the role of traditional comedians, has taken the unusual step of suing the United States government over a tax dispute -- at the same time that the company is holding $150 billion worth of taxpayer money and is set to receive another $30 billion.

Apparently that isn't good enough. The Wall Street Journal reports (subscription required) that AIG sued the U.S. over $306 million in taxes, interest and penalties. A company spokesman told the reporter that "AIG is taking this action to ensure that it is not required to pay more than its fair share of taxes."

The New York Times reports that Wall Street investment banks -- including UBS AG (NYSE: UBS); whose vice chairman, Phil "Americans are Whiners" Gramm resigned as chief economic advisor to John McCain -- have been helping foreign hedge funds dodge U.S. dividend taxes. The good news is that the amount of lost taxes looks to be in the "mere" hundreds of millions -- a tiny amount when you consider the record $490 billion deficit we face for 2009.

The tax dodging scheme -- dubbed "dividend enhancement" -- is complex and UBS was not alone in pushing it. The New York Times reports that Morgan Stanley (NYSE: MS), Lehman Brothers (NYSE: LEH), Deutsche Bank (NYSE: DB), Merrill Lynch & Co., Inc. (NYSE: MER) and Citigroup, Inc. (NYSE: C) joined UBS in this scheme to sell complex financial products that enable offshore hedge funds who get dividends from U.S. stocks to dodge the 30% dividend tax.

But UBS is continuing to look more and more like a shady enterprise. First, it gained notoriety for its brazen policy of dumping Auction Rate Securities (ARS) from its own books into the accounts of its unsuspecting "private banking" clients. It has since settled those charges. And now it stands accused of helping a hedge fund, Maverick Capital, bilk the U.S. government of "$95 million in dividend taxes from 2000 through 2007," according to the Times.

In a tough economy, the income tax burden on individuals becomes more of a weight. Add the payments to higher gas prices, mortgages that are being reset at lofty levels and rising food costs and the results can be awful.

But at least corporations are paying income taxes to carry part of the burden of running the federal government, right? Too bad that it turns out that this assumption is wrong. As The New York Times writes, "Two out of every three United States corporations paid no federal income taxes from 1998 through 2005, according to a report released Tuesday by the Government Accountability Office, the investigative arm of Congress"

How sweet a deal is that?

Part of the trick is that many companies move money to countries outside the U.S. where the tax burden is lower.

In a period where the federal deficit is at nose bleed levels and individual tax payers are being crushed, Congress will probably be upset enough to pass bills to correct the inequity.

How the companies got away with it for so long is a question that is pretty disturbing.

Douglas A. McIntyre is an editor at 247wallst.com.

This post is part of a series where personal finance expert Dan Solin looks at money moves that may seem smart in tough economic times, but are actually quite dumb. See all 12.

If you fail to file your tax return because you owe more than you can pay, you are digging a deep hole for yourself. It will not be easy to climb out of it.

The IRS treats failure to file a tax return as a far more serious offense than filing a tax return and not paying the full amount of the taxes due.

If you fail to file a tax return, the IRS has the right to prepare and file one for you. The return prepared by the IRS may not give you credit for deductions and exemptions to which you may be entitled. Once the return is prepared, the IRS can bill you for the amount it calculates is due, plus penalties and interest.

While it is not the current policy of the IRS to criminally prosecute taxpayers who fail to file returns, it can happen. If you do not file voluntarily, or make arrangements to file, and you receive a notice from the IRS that you are under criminal investigation, you might run out of options and find yourself facing a criminal trial.

A far better option is to file your returns on time (or seek an extension) and discuss with the IRS the options it has available for making payments over time.

You may qualify for paying your taxes in installments, particularly if the amount owed is less than $25,000 including combined tax, payment and interest.

You also may qualify for an "offer of compromise," which will resolve your tax liability for an amount less than you might otherwise owe. There are a number of stringent requirements imposed by the IRS in order to qualify for an offer of compromise. However, the IRS has broad discretion to resolve tax liabilities if the taxpayer can demonstrate that "... exceptional circumstances exist such that collection of the full amount would create economic hardship...."

You should consult with a tax advisor to be fully informed of your rights in dealing with overdue taxes. But remember, the problem will not just go away. Failing to file your tax returns will only make it worse.

Dan Solin is the author of The Smartest Investment Book You'll Ever Read (Perigee Books, 2006) and The Smartest 401(k) Book You'll Ever Read (Perigee Books, 2008).

The Internal Revenue Service is reporting that it still has about 5.2 million tax rebate checks which it cannot send out because the people who should get them have not filed a 2007 tax return. According to a report in USA Today, these citizens only need to fill in a few lines on IRS form 1040A, in order to get their money. The IRS says that veterans and retirees, those who could use the money the most, make up the major portion of the population that has not yet received it's rebates. The IRS expects to issue 124 million rebate payments by year's end. So far, about 76.5 million of those payments have gone out.

Typically, seeing an envelope with the letters "IRS" on it in your mailbox could be a cause for concern, but over the next week some 130 million homes in America will be receiving letters in the mail bringing good news from the Internal Revenue Service.

As you are probably already aware, in its attempt to keep the economy afloat, the US government passed a $168 billion economic stimulus plan, and as a result millions of households across the nation are going to be receiving a little extra cash this year from the US government.

Just to make sure that everyone knows what they can expect, the IRS is mailing over 100 million letters next week to make certain that everyone who may be eligible files their 2007 taxes so that they don't miss the chance to claim their stimulus payments.

For Mac Murphy of New Rochelle, NY, a husband and father of two teen-age daughters in college, the rise in the price of gasoline is not an incidental expense.

"It's like an extra car payment, for crying out loud," Murphy said as he pumped $3.39 per gallon unleaded regular gasoline into his wife's car Tuesday.

Gas pump shock

Murphy pays for his daughters' gas bills while the two are studying at college. Each has a car. Up until about a year ago, the bills were about $20-$25 per month each. These days, they're sending back monthly bills that are routinely over $50 each, and those gasoline expenses combined with his and his wife Laura's gas purchases, means ..."about $300 dollars a month in gasoline expenses."

The family has done its best to limit gasoline expenses by carpooling and eliminating unnecessary trips, and next year the family will trade in one car for a substantially more-fuel-efficient vehicle. Still, given that he and his wife each commute by car to different locations, there's only so much they can do to reduce their gasoline costs. Further, Murphy says the expense "is only likely to increase this summer, when gas hits $4 per gallon."

When told by an inquirer that gasoline may actually approach $5 per gallon this summer in high-cost cites such as his metro New York region, Murphy was apoplectic.