Trustee Irving Picard has worked out an agreement with the IRS, which will add $326 million to the distribution fund for victims of Bernie's massive Ponzi scheme. Theory Behind Payments to IRS. In a court filing, Picard said that payments had been made on behalf of 145 foreign accountholders totaling about $330 million.  The IRS erroneously refunded about $4.2 million to 2 of the foreign accountholders, according to the court filing.  According to Picard, there's no record of Madoff ever having purchased or sold any securities on behalf of foreign accountholders. Picard, believes that "the payments made to the IRS falsely identified the funds as income tax withholding in order to give the investment advisory arm of Bernard Madoff Investment Securities an air of legitimacy and to avoid inquiries." The settlement money will eventually be distributed to Madoff's customers who have valid claims.  About $103 million of the settlement will be reserved for payment to meet any judgements against the IRS or the trustee. The reserve amount will be released for distribution two years and 60 days after the settlement is approved by the court. For more info, go to [Reuters 11/23/11]