Disclosures of Return Information in the IRS Whistleblower Program
January 26, 2012 | 
Author 
On February 2, 2010, Deborah A. Butler, Associate Chief Counsel, provided legal advice in PMTA 2011-31, advising the employees of the IRS Whistleblower Office that they are authorized to disclose [taxpayer] return information in making tax reward payment determinations pursuant to Section 7623 or providing status updates to IRS whistleblowers regarding pending, unprocessed, or dismissed claims under Section 7623.
However, the office stressed, the specific taxpayer return information that may be disclosed to an IRS whistleblower in a particular instance will depend on the facts and circumstances of the matter. In the legal opinion, Ms. Butler stated,
Neither section 7623 nor any other Code section specifically authorizes the disclosure of taxpayer return information in the course of the whistleblower award review and determination process. Nonetheless…Congress presumably did not intend to create an irreconcilable conflict between the IRS Whistleblower Office’s non-disclosure obligations and its obligation to convey appealable determinations to whistleblowers.
The legal opinion from the IRS Office of Chief Counsel concluded that IRC § 6103(h)(4), which authorizes disclosures of such information in judicial and administrative proceedings, authorizes the IRS Whistleblower Office disclosures, as the whistleblower award review and determination process would be considered an administrative proceeding.
PMTA 2011-31 was dated Feb. 1, 2010.
Despite the above legal opinion from the Office of Chief Counsel, we note that in the nearly two years that has passed since the advice was given; the IRS Whistleblower Office is reluctant to provide status updates as to the open whistleblower cases. It is important that the whistleblower engage a knowledgeable and experienced tax whistleblower attorney to assist them.
To the extent that you have any comments or questions, please call the former IRS attorneys at the Tax Whistleblower Law Firm, LLC at 1-877-404-1040 or email tom@rewardtax.com.
Posted in IRS Whistleblower Procedures, News | 
Tags: IRC § 7623, IRS reward, IRS whistleblower, IRS whistleblower program, tax whistleblower | 
No Comments »
The IRS wants the Help of IRS Whistleblower Lawyers and their Clients.
The IRS wants IRS whistleblower lawyers and their clients to assist the IRS in the enforcement of the law.
IRS whistleblower lawyers have brought a large number of previously unrecognized tax issues to the attention of the IRS. A prior report by the Treasury Inspector General of Tax Administration (TIGTA) determined that the cost of assessing and collecting tax is approximately 40% less that what the cost would be without the inside information from IRS whistleblowers. A number of good tax issues have been brought to the IRS attention by IRS whistleblower lawyers and their clients and the success of the program is up to the IRS. Some of the more recent large tax issues are -
1. Offshore Accounts (IRS has instituted several “amnesty” type programs and is expected to reach $5 billion in collection since this issue was brought to its attention of the IRS by a Whistleblower).
2. Employee v. Independent Contractors - many businesses aggressively classify their employees as independent contractors to avoid billions of dollars of payroll taxes. A significant number of IRS Whistleblower lawyers and their clients have brought these matters to the attention of the IRS and in response the IRS decided again the best way to handle this tax issue is again to offer an amnesty program.
3 Identity theft. This area of the law has gotten lots of attention from the news media for the underlying theft issue, but there are hundreds of millions of dollars of tax that are not being paid by the thieves on the income and the IRS is looking for whistleblowers to bring to its attention large identity theft matters.
4. Gift Tax. Most of the population is aware that the very wealthy are transferring great wealth to their children. This is often done through legitimate tax planning. However, this can be done through a common means of simply transferring real estate to family members at no cost. In fact valuable real estate can be transferred at no cost (i.e. a gift) and there are no reporting requirements. That is, no 1099s, or any other information type returns, are issued to report the land transfers between family members. In fact, a number of whistleblowers have simply scoured the recorder of deeds, either locally or on the internet, finding land transfers of wealthy individuals to family members that are actually identified as “gift deeds” or simply reflect that the land is being transferred for $1 or the love and affection of the grantee (i.e. the children).
The IRS recognize that this last issue exists due to the information brought to its attention by IRS Whistleblower lawyers and their clients and have determined that it will put its resources into this issue.
As part of a new initiative in finding gift tax evaders, the Internal Revenue Service asked a federal court for permission to order a California state tax agency to hand over its computer database of everyone who transferred real estate to relatives for little or no consideration.
In response, the federal district court judge gave the IRS permission to serve a “John Doe” summons on the California State Board of Equalization demanding the names of residents who transferred property to their children or grandchildren for little or no money. The IRS wants those names as part of a crackdown on what it believes is the widespread failure to file required gift tax returns when real property is passed between family members.
The IRS has already received information about intra-family property transfers from county or state officials in Connecticut, Florida, Hawaii, Nebraska, New Hampshire, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Tennessee, Texas, Virginia, Washington state and Wisconsin.
In an affidavit filed in the California case in October, Josephine Bonaffini, the Federal/State Coordinator for the IRS’ Estate and Gift Tax Program, said the agency has so far examined 658 taxpayers identified as transferring property to relatives and concluded that 238 of them should have, but didn’t, file Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return. Twenty of those delinquent filers have already been assessed extra tax because they had exceeded the amount each person is allowed to transfer gift tax free, she said. Through 2010, that lifetime gift tax exemption was just $1 million. For 2011 and 2012, it has been raised to $5 million. Anyone can give anyone else property or cash worth up to $13,000 a year without that gift counting against the lifetime exemption, but gifts above that $13,000 “annual exclusion” amount must be reported on a Form 709 so the IRS can keep track of how much of his or her lifetime exemption each taxpayer has used up.
With a normal summons (i.e. Form 2039), the IRS seeks information about a specific taxpayer whose identity it knows. A John Doe summons, by contrast, allows the IRS to get the names of all taxpayers who are members of a certain group it has reason to suspect might have broken the law. In the past the IRS has used John Doe summons to seek lists of American taxpayers who have used aggressive tax shelters and of those who have unreported offshore accounts at Swiss Bank UBS and at HSBC’s bank in India.
Again, the IRS whistleblower program is and will continue to be a great success as it brings facts and issues to the IRS
The Tax Whistleblower Law Firm (1-877-404-1040)consisting of former IRS lawyers assist whistleblowers in filing acceptable claims into the IRS Tax whistleblower program by providing well developed facts, issue and law, evaluating the continued confidentiality of the client, as well appealing administratively and judicially the determination by the IRS.
IRS Tax Whistleblower Service at no Cost | IRS Whistleblower Claim
Form 211
In an effort to promote the IRS Whistleblower program, the Tax Whistleblower Law Firm is willing review and suggest changes and modifications to IRS Whistleblower Claims at no charge to those individuals that desire to file their own IRS Whistleblower Claims. We are willing to do this at no cost to the Whistleblower because we believe in the IRS Whistleblower program and want to see it successful in the years ahead. We, as taxpayers, are all in this together, and certain taxpayers should not be circumventing the law simply because they can, or have been in the past. The only condition is that we have the opportunity to provide our review prior to submission of the IRS Whistleblower Claim to the IRS.
This blog will provide information to those individuals that would like to file an IRS Whistleblower claim without the assistance of an IRS Whistleblower attorney/lawyer.
Although it does not appear to be a complex matter, the IRS simply requires that such an individual file a one page Form 211, Application for Award for Original Claim….nothing more. There are 18 relatively easy questions, which include 9 questions (name address, etc.) just about the whistleblower.
As the IRS states in the instructions to the filing of the IRS whistleblower claim, as well in Notice 2008-04, the information provided should be “specific and credible.” To the extent the IRS whistleblower has documentation, we certainly recommend that the IRS whistleblower claim contain not only specific and credible information, but be accompanied by supporting (i.e. relevant) documentation. Remember, with specificity comes credibility. All the information should be presented clearly and concisely. Take into consideration all the positive factors the IRS will consider when determining the maximum IRS tax reward that you may be entitled and try to meet those positive factors. See our prior blog on the IRS computation of a tax reward
Our office also recommends that the 211 claim, or 211 claim package, contain the same type of information that an IRS administrative file might contain, should the IRS have completed its examination and sent the case forward for trial. As former IRS attorneys we strive to provide all the necessary information and documentation that the IRS needs in the processing of the claim and the completion of the examination, including a legal analysis of the substantive tax issue. We will make specific suggestions as we review the files on a case by case basis for those whistleblowers filing their own claim.
The above is what is recommended for the submission of an IRS whistleblower claim. An experienced and knowledgeable tax whistleblower attorney will only be able to assist if they are tax attorneys familiar with the substantive tax issue and experienced with the IRS whistleblower procedures. Such an attorney will provide value assuring that the 211 Claim is clear and concise and will be accepted into the program. In addition, the IRS whistleblower attorney work to maximize the reward, shorten the examination time (hence the time for pay off or the reward), and protect the identity of the whistleblower, including providing a guarantee.
Other reasons to consider an experienced tax whistleblower attorney include the continuance guidance through what is likely a 5 to 7 year process. The attorney will supplement the claim over time with new and material information should such information exist. The attorney will accompany the whistleblower to any meetings for which the IRS desires to meet with the whistleblower and will prepare the whistleblower for such meeting. Lastly, the experienced tax whistleblower attorney will handle the administrative and judicial appeal at no additional cost.
The Tax Whistleblower Law Firm has submitted hundreds of tax whistleblower claims over the years for billions of dollars and, to date, has had every case accepted into the IRS Whistleblower Program. Therefore, again, if you are filing an IRS whistleblower claim and would like, at no charge or commitment, comments and recommendation by the former IRS attorneys of the Tax Whistleblower Law Firm with respect to your IRS whistleblower claim, call 1-877-404-1040 or email tom@rewardtax.com .
Posted in FAQ, Former IRS Attorney's Opinion, IRS Whistleblower Procedures, News | Tags: former IRS attorney, IRS whistleblower claim, IRS whistleblower program, maximize reward, tax whistleblower attorney, tax whistleblower law firm, tax whistleblower lawyer, tax Whistleblower reward program | Comments Closed
What is Purpose of Appealing a Rejected IRS Whistleblower Tax Case?
With respect to IRS Whistleblower Cases the US Tax Court ruled in Cooper v. Commissioner, 136 T.C. 597(2011) that it had the jurisdiction to hear “rejected” IRS Whistleblower cases on appeal. The Tax Court decided that the right to appeal was not limited only to those cases that the IRS had determined a reward percentage (i.e. 15% to 30%) , but also those cases in which the IRS determined that a whistleblower was not entitled to a reward.
The Tax Court has issued good rulings with respect to the IRS Tax Whistleblower Program, However, the tax court has also ruled it did not have the jurisdiction to order the IRS to conduct a tax examination in an IRS Whistleblower matter. Therefore, if the IRS rejects a IRS Whistleblower case, it cannot be ordered by the U.S. Tax court to conduct the examination, nor can it determine the tax deficiency of a taxpayer that is not before it based upon the IRS Whistleblower tax information.
So what is the point of giving the tax court the jurisdiction to hear a rejected cases if it has no power? The practical answer is that the case might have been improperly rejected by the IRS in that the IRS did conduct an examination, collected tax, and simply and improperly rejected the claim for purposes of paying the tax reward.
However, the IRS has quickly formed a successful strategy of dealing with the blow dealt it in the Cooper case in dealing with the appeal of rejected IRS Whistleblower cases. The IRS has successfully, to date, filed motions for summary judgment (i.e. a motion that the court can rule on as there are no material facts in dispute) in an effort to dispose of these cases.
Suggested Strategy of the Whistleblower in the Appeal:
A Whistleblower of a rejected Whistleblower case should have a good basis for petitioning the US Tax Court for review of its whistleblower case. Sometimes, this might be, as stated above, because the Whistleblower believes, in good faith, that the IRS collected money due to the Whistleblower’s information.
Therefore, the IRS Tax Whistleblower should be familiar with the Tax Court Rules and
- Timely petition the U.S. tax Court (within 30 days of the letter of determination)
- Timely file discovery (typically should be done on the 30th day after the IRS files an Answer).
- Timely respond to the motion for Summary Judgment, as ordered by the Court, pointing out to the Court material facts that are at issue.
To date the IRS has been successful by providing an Affidavit that
- it took “no administrative action”, and
- that there were no “collected proceeds” of tax penalty and interest based upon the information provided by the Whistleblower.
A good IRS Whistleblower Tax Attorney/Lawyer knows that the terms sworn to in the affidavit by IRS counsel have no defined meaning, and therefore, could be viewed as material facts in dispute. For instance does an “administrative action” include opening a IRS Whistleblower file, making a phone call, referring the case criminally, referring the case for civil examination, holding a taint conference, or does it simply mean something else like opening and completing a tax examination or the ultimate assessment of tax. Surely the IRS, as a governmental administrative agency, has taken an administrative action in most of these rejected IRS Whistleblower tax cases. Again, unless the case is rejected upon submission, the IRS has reviewed the claim, opened a Whistleblower file, scanned the Claim, made phone calls, sent out emails, and at a minimum held meetings. (All the IRS administrative actions should be confirmed in responses to the Whistleblower’s timely discovery requests).
As to the second part, in most cases, the IRS Whistleblower does not know whether or not tax, penalty and interest were collected due to information provided in the IRS Whistleblower Claim which is why the Whistleblower must engage in the discovery process. The IRS will move for summary judgment without wanting to provide the Whistleblower copies of the taxpayer’s tax transcripts, the IRS history notes, emails, memos, etc. However, that by itself leaves a material fact in dispute. In addition, the IRS has issued proposed regulations and is now in the process of defining what is meant by “collected proceeds.” It is difficult to believe that it can swear that it did not collect any tax penalty and interest when that term (i.e. collected proceeds) remains undefined. For instance, if the IRS settles with a taxpayer and collects tax on future years but noting on the past years for which the Whistleblower provided information, should the tax collected in future years, due to the settlement, be considered collected proceeds subject to an award. The IRS now says no. Discovery is very important and should be part of the entire process.
At the very least, tax court discovery should inform the Whistleblower as to why his/her case was rejected by the IRS. If the 211 Claim was improperly prepared (i.e. not clear and concise or failed to contain “specific and credible” information), then the Whistleblower should consider contacting an experienced Tax Whistleblower Attorney to assist in the resubmission of the Claim.
The Tax Whistleblower Law Firm, consisting of former IRS attorneys, has been very successful in working with the IRS and the tax whistleblower program. The Tax Whistleblower Law Firm has submitted claims as to hundreds of taxpayers for billions of dollars and to date, has had every case accepted into the IRS Whistleblower Tax Program. Should you have any questions or comments as to the IRS Whistleblower program please visit www.taxwhistleblowerforum.com, or call 1-877-404-1040.
Posted in FAQ, Former IRS Attorney's Opinion, IRS Whistleblower Procedures, News | Tags: IRS reward, IRS whistleblower, IRS whistleblower program, Tax Court, tax whistleblower law firm, tax whistleblower lawyer, U. S. Tax Court | Comments Closed
U.S. Tax Court Gives the IRS Whistleblower Program a Boost
On December 28, 2011, the IRS Whistleblower Program received a big boost whent the U.S. Tax Court proposed new Tax Court Rule 345 to protect the identity of the Tax Whistleblower. Those seeking a tax award/reward for reporting tax fraud are assured that their identity is protected by the U.S. Tax Court in the appeal of their IRS Whistleblower claim…”if appropriate.”
The IRS policy is to protect the identity of a IRS Whistleblower that provides infomration as part of the IRS Whistleblower Program. However, there does exist the unusual situation in which an IRS Whistleblower may be called to testify in a court proceeding. However, this situation has not occurred under the new IRS Whistleblower Program since it was initiated on December 20, 2006. In addition, it is highly unlikely that this situation will happen in the future with the proper representation.
IRS Whistleblower Attorneys/Lawyers should be tax attorneys/lawyers first and whistleblower attorneys/lawyers second. In every IRS Whistleblower matter the tax whistleblower attorney should evaluate the claim (i.e. 211 Form), as well as the client and make a determination if the IRS whistleblower is a likely candidate for being a witness should the tax claim ultimately result in litigation by the IRS. The attorneys at the Tax Whistleblower Law Firm use their experience, as former IRS attorneys, to assist them in making this decision. Since the Tax Whistleblower Law Firm prepares the 211 claim package for submissions into the IRS whistleblower program in a manner similar to what they would expect the IRS to have prepared if they were in a position to litigate the case as if they were still IRS attorneys, they are also in a position to make a judgment if the client/whistleblower is a likely witness should a case end up in litigation. No tax whistleblower claim should ever be submitted to the IRS in which the whistleblower is not advised as to the likelihood of them having to testify in the matter.
Confidentiality is what makes the IRS Whistleblower Program successful. Congress, pursuant to I.R.C. § 7623, gave the IRS Whistleblower the right to appeal the IRS determination of award/reward to the US Tax Court. Until recently, the tax court had not ruled as to whether the tax whistleblower could proceed anonymously in the filing of an appeal. On December 8, 2011, in the case of in Whistleblower 14106-10 v. Commissioner, 137 T.C No. 15 (2011), the U.S. Tax Court ruled that the openness of a public record must be weighed with the protection and safety of the whistleblower in these matters. The Tax Court has now proposed a new Rule (i.e. Tax Court Rule 345) to protect the identity of the IRS Whistleblower
Proposed Rule 345. PRIVACY PROTECTIONS FOR FILINGS IN WHISTLEBLOWER ACTONS(a) Anonymous Petitioner: A petitioner in a whistleblower action may move the Court for permission to proceed anonymously, if appropriate. Unless otherwise permitted by the Court, a petitioner seeking to proceed anonymously pursuant to this Rule shall file with the petition a motion, with or without supporting affidavits or declarations, setting forth a sufficient, fact specific basis for anonymity. The petition and all other filings shall be temporarily sealed pending a ruling by the Court on the motion to proceed anonymously.
Through experience we have worked with IRS whistleblowers that have indicated that if their identity is not protected, they could lose their life, family, careers, employment, licenses (attorneys/CPAs), etc. Therefore, this proposed rule by the U.S. Tax Court is an important step for the success of the program. We strongly recommend that a whistleblower work with qualified “tax” attorneys to assist them with the IRS Tax Whistleblower Program as well as an appeal, so as to protect their identity. There are several tax whistleblower law firms, by guaranteeing the whistleblower’s confidentiality, are willing to forfeit their fees should the law firm or the IRS intentionally or unintentionally disclose their identity. There are even fewer law firms that are willing to handle the appeal to the U.S. Tax Court as part of the representation.
Should you have any questions to the IRS Whistleblower Program, please post to the comments below, call the Tax Whistleblower Law Firm, or email tom@rewardtax.com .
Why should a Tax Whistleblower hire a Tax Whistleblower Attorney?
The IRS tax whistleblower program is now five years old and is becoming more and more complex. Well, that is, it is only complex if the attorney knows what they are doing … as they must thoroughly understand the tax whistleblower statute (I.R.C. 7623), whistleblower
Tax Whistleblower Should engage an Experienced Tax Whistleblower Attorney
regulations/notices, Internal Revenue Manual (IRM) tax disclosure issues, confidentiality agreement, tax court rulings, administrative appeals, judicial appeals, reward computations, and on top of this, they must understand a similar set of laws, regulations, and rulings dealing with the underlying substantive tax issue for which the entire tax whistleblower case is based.
Remember, any attorney can assist a tax whistleblower in the submission of a claim. A divorce attorney or a personal injury attorney can fill out a Form 211, Application For Award For Original Information. The Form 211 is not magical nor is it complicated. Many tax whistleblowers have filed their own 211 in the past. It is only after the tax whistleblower files a Claim for a Tax Award/Reward, and if fortunate enough to have their Claim accepted into the IRS Tax Whistleblower Program, that they begin to face the complexity and unknowns of the Tax Whistleblower Program. It is at this time many tax whistleblowers consider hiring an experienced and knowledgeable tax whistleblower law firm to assist them in such very important matters as -
1. Supplementing the Claim with new “material” and “relevant” facts.
2. Supplementing the Claim with the Law and legal analysis to better the Claim. (i.e. a positive factor).
3. Attending the Taint/Debriefing Conferences with the IRS and preparing the client for nearly every question that will be asked by the IRS in the conference.
4. Reviewing the reward computations taking into consideration the “collected proceeds,” “tax transcripts,” “Positive factors,” “Negative factors,” etc.
5. Representing the tax whistleblower in the “administrative appeal.”
6. Representing the tax whistleblower in the “judicial appeal” before the U.S. Tax Court.
The tax whistleblower attorney/lawyer should have the knowledge and experience in all of the above. The attorney/lawyer/law firm should be successful in the submission of all the Form 211 into the IRS tax whistleblower program on behalf of their clients.
The goal of the Tax Whistleblower Law Firm should be to have the
1. the case accepted into the IRS Tax Whistleblower Program,
2. maximize the tax rewards/award,
3. minimize the IRS examination time, and
4. protect the whistleblower’s identity/confidentiality which should include guaranteeing the confidentiality of the whistleblower.
The Tax Whistleblower Law Firm has all the experience to assist in the above. As former IRS attorneys we understand the underlying substantive tax law as well as the whistleblower law. We have submitted tax whistleblower claims with respect to hundreds of taxpayers for billions of dollars. To date, every claim submitted by our firm has been accepted into the IRS Tax Whistleblower Program. Our criteria in submitting a claim is to submit only those claims that we feel that we could litigate and win on behalf of the IRS, if in fact, we were still IRS attorneys.
Posted in News | Tags: former IRS attorney, IRS reward, IRS whistleblower, IRS whistleblower program, tax whistleblower attorney, Tax Whistleblower Program | Comments Closed
The Success of the IRS Tax Whistleblower Program (i.e. Payment of Tax Reward) is in the Hands of the IRS. | IRS whistleblower program
A recent comment by the Director of the IRS Whistleblower Office indicates that the IRS is serious about ensuring the success of the Tax Whistleblower Program.
“Where There Is A Choice, The [Tax] Whistleblower Should Win.”
This comment says it all. There are many tough decisions to be made by the IRS, but if the above quote is the true reflection of the attitude of the IRS, then the IRS Tax Whistleblower Program is on its way to being highly successful. However, as background to the above quote, it was said in the context of considering the “fair” and “right” thing to do in tax whistleblower situation.
IRS Whistleblower Office
Some of the tough issues facing the IRS are ….
Is the term “collected proceeds,” as used in I.R.C. § 7623, going to be narrowly defined in the final regulations that are yet to be issued?
We will see. The IRS could go with the true meaning of Congress and reward the tax whistleblower for his/her contribution….or it may narrowly define the term “collected proceeds” as it did in the proposed regulation. For instance, will the term “collected proceeds” include future amounts collected (under certain circumstances) rather than simply past amounts? Will collected proceeds take into considerations net operating losses (NOLs) or tax credits carried back or forward to the years for which the tax whistleblower provided information? Will collected proceeds take into consideration offsets as to refunds owed the taxpayer on other years?
Will the IRS recognize that it must make partial payments to a Tax Whistleblower if there are no prohibitions as to making a partial payment….or will the IRS wait as long as possible in making the tax reward payment to the Whistleblower?
The IRS can always wait until the last penny of tax is collected with respect to a tax liability or until the ten year statute of limitations expires before it feels obligated to paying the tax award/reward to the whistleblower. In fact there are no statutory (or self imposed) deadlines in which to pay a tax reward/award to a whistleblower. However, the IRS may realize that if there are no prohibitions (i.e. the assessment of tax is final (i.e. no further avenue of appeal) and/or the collection of tax is not subject to a claim for refund (two year rule)) as to making a partial payment, it will immediately make the partial payment of the tax award/reward to the Tax Whistleblower.
Currently this office has submitted a request for partial payment of a tax reward/award for which the Form 211 Claim was filed in 1999 and the tax was paid in 2005. Hopefully the IRS will side with the Whistleblower in this matter and make a partial payment of the tax reward/award in an effort to promote the Tax Whistleblower Program.
Is an “administrative action” as used in I.R.C. § 7623 a “detection of tax” the result of a tax examination, tax assessment, court decision, or is it simply an action by an “administrative agency”, that might include opening a whistleblower file, making a telephone call to the taxpayer, sending a letter to the taxpayer, establishing an “amnesty program” due to the Whistleblower’s Claim, issuing a new Tax Regulation/Notice as a result of the Tax Whistleblower Claim.
Does a “related action” as used I.R.C. § 7623 include subsequent tax years with respect to the same ongoing issues raised in the tax whistleblower claim? Does it include other tax issues discovered by the IRS in the tax examination for which the whistleblower provided information? Does it include other taxpayers for which the IRS discovered as a result of the tax whistleblower claim?
How does the IRS allocate the tax reward between two whistleblowers who both substantially contributed to the determination of tax?
As the bottom line to this blog, there are dozens, if not hundreds, of unresolved issues that will be resolved over time. Let’s hope the IRS lives by the motto…Where There Is A Choice, The [Tax] Whistleblower Should Win.
Should you have any questions or comments as to the IRS tax whistleblower program or obtaining a tax reward, please post comments to this blog, visit www.taxwhistlblowerforum.com, call the former IRS attorneys at the Tax Whistleblower Law Firm at 1-877-404-1040 or email tom@rewardtax.com .
Posted in Former IRS Attorney's Opinion | Tags: 7623, former IRS attorney, IRS whistleblower program, tax reward, tax whistleblower law firm, tax Whistleblower reward program, Whistleblower Office, www.RewardTax.com | Comments Closed
How does the IRS Tax Whistleblower Office compute the tax reward/award on Tax Whistleblower Cases?
The IRS Tax Whistleblower Office is at the beginning stage of paying tax rewards/awards on these tax whistleblower cases. It is clear the tax whistleblower program is a process that is developing and being tweaked over time. IRS Whistleblower Office Director Stephen A. Whitlock and his staff are busy anticipating and resolving issues and problems as they develop.
IRS will Calculate Tax Reward
In June 2010, the IRS published IRM 25.2.2 which provided certain factors that will be considered in determining a tax reward/award. In fact, it is advisable that every tax whistleblower consult with an experienced and knowledgeable tax whistleblower attorney/lawyer in order to submit the 211 Claim (i.e. Tax Whistleblower Claim) in a manner to maximize the tax award/reward.
In addition, the 211 claim package should be prepared and submitted so as to minimize the examination time and thereby minimize the time period in which to pay the reward/award.
As of this time, only several tax rewards/awards have been paid under the new IRS Tax Whistleblower Program pursuant to IRC 7623(b).
At this time, this is how the awards are determined by the IRS Tax Whistleblower Office:
- The IRS has established 5 tax reward brackets (15%, 18%, 22%, 26% and 30%) that will be applied to the amount of tax collected.
- In determining a reward, the IRS will begin at the 15% reward bracket.
- The IRS will then evaluate the positive factors and to the extent the tax whistleblower has met a number of these positive factors, the reward will be increased from 15% to 22%, and if the tax whistleblower has met significant number of the positive factors (i.e. perhaps assisted or showed their willingness to assist in the determination of tax (tax examination/tax crime prosecution) in an extraordinary manner such as testifying in court, wearing a wire, etc.), the tax reward bracket will be increased from 22% to 30% of the amount of tax collected.
- After considering the positive factors, the IRS will examine the negative factors as set out in IRM 25.2.2. To the extent there are negative factors, the above reward determination will be reduced. In the case of 30% tax reward as determined in 3, above, it will be reduced to 26%. To the extent there are significant negative factors, the tax reward will be reduced to 18% from 26%, as established in the previous sentence, or if the starting point is 22% as stated in 3 above, it will be reduced to 18%, but no lower than 15% under any circumstances.
Note 1: The positive and negative factors are not exclusive and are not weighted. In the particular circumstances of a case, one factor may out-weigh several others and result in a unique or exceptional award determination. Negative factors can offset positive factors, but cannot result in an award that is less than the statutory minimum (15%)
Note 2: A tax reward/award that is simply from third party sources or for which the tax whistleblower initiated and planned the transaction that led to the underpayment of tax, then pursuant to 7623(b), the reward cannot exceed 15%.
Note 3: Under certain situations the IRS Tax Whistleblower Office will consider splitting a tax reward bracket in an effort to achieve the “right” answer.
The above analysis is the current procedure as to how a tax reward/award is to be computed and paid. This procedure will likely to be adjusted over time by both the U.S. Tax Court and the IRS Tax Whistleblower Office.
To the extent that there are any questions please call the Tax Whistleblower Law Firm at 1-877-404-1040 or email tom@rewardtax.com as to how the IRS Whistleblower Office is likely to determine a tax reward/ award, or as to any other questions regarding the IRS Tax Whistleblower Program.
Posted in FAQ, IRS Whistleblower Procedures | Tags: IRS reward, IRS whistleblower program, maximize reward, tax reward, tax whistleblower, tax whistleblower attorney, tax whistleblower law firm, tax whistleblower lawyer, Tax Whistleblower Program, tax Whistleblower reward program, Whistleblower Office | 1 Comment »
Tax Court Rules to Protect the Confidentiality of the Tax Whistleblower
US Tax Court issues major Whistleblower Opinion
The IRS has procedures to protect the identity of the Tax Whistleblower and maintain his/her confidentiality as part of its IRS Tax Whistleblower Program. In addition, IRC § 7623(b) gives the Tax Whistleblower the right to appeal the determination/rejection of an award. However, the irony of this entire Tax Whistleblower Program up until the recent Tax Court decision is that the Office of Chief Counsel (i.e. attorneys for the IRS) adamantly opposes tax whistleblower attorneys/lawyers efforts to protect the identity (remain anonymous) of their client in the U.S. Tax Court.
Until the December 8, 2011, in the U.S. Tax Court’s opinion in Whistleblower 14106-10 v. Commissioner, 137 T.C No. 15 (2011), it was unknown as to what facts and circumstances were necessary for the Tax Whistleblower to remain anonymous in the judicial appeal before the court. As always, the court must balance the long tradition of open trials and public access to court records with the need to protect the identity of a Tax Whistleblower.
The Tax Court, in a full court opinion, did an admirable job in assembling the law regarding confidentiality of a Tax Whistleblower for which the tax whistleblower is not otherwise protected under the law. Although there is no guarantee that the Tax Whistleblower’s identity will be protected in an appeal, the Tax Whistleblower attorney/lawyer that files a petition for judicial review of the IRS determination (including a rejection) of a tax whistleblower claim, now has a roadmap as to what facts are necessary for his/her client to remain anonymous.
In its opinion, the U.S. Tax Court stated,
Respondent’s [IRS] take-it-or-leave-it approach to confidentiality improperly minimizes the practical value of judicial review, which is an integral part of the scheme under section 7623(b). Respondent’s approach, which we cannot say is disinterested, would confront claimants with a dilemma of either forfeiting confidentiality to seek judicial review or forfeiting judicial review. The likely upshot would be a chilling effect on some claimants who have a compelling need to proceed anonymously. This result would be at odds with the ostensible legislative purpose of encouraging tax whistleblower claims and promoting public confidence, through judicial oversight, in the administration of the tax whistleblower award program.
It is clear, the Tax Court, after careful thought, reached the right answer as to this issue resulting in a tremendous boost to the IRS Tax Whistleblower Program. Every Tax Whistleblower that considers appealing the IRS determination should make sure that they engage an experienced and knowledgeable tax whistleblower law firm to assist them with the appeal.
The right (experienced and knowledgeable) tax whistleblower attorney/lawyer (experienced in both tax law and whistleblower law) can assist in all the following:
-
Properly preparing the 211 Claim to get the Claim into the IRS tax whistleblower program.
-
Regularly Supplementing the 211 Claim with new and material facts.
-
Decreasing the IRS examination time and therefore the ultimate payment of the Reward.
-
Attending all conferences with the IRS and properly advising the client prior to the conference.
-
Properly monitoring the Claim throughout the tax whistleblower process.
-
Assisting in the administrative appeal of the tax reward.
-
Assisting in the judicial appeal of the tax reward before the U.S. Tax Court.
-
Help ensure and maintain confidentiality of the tax whistleblower throughout the tax whistleblower process including the willingness to forfeit his fees if he or the IRS discloses the tax whistleblower’s identity.
Posted in Former IRS Attorney's Opinion, News | Tags: IRS reward, IRS whistleblower, IRS whistleblower program, Senator Grassley, Tax Court, tax reward, tax whistleblower, tax whistleblower attorney, tax whistleblower law firm, tax whistleblower lawyer, Whistleblower claim, whistleblower program | 2 Comments »
The IRS Must Withhold on Tax Whistleblower Award Payments
Although many Tax Whistleblower Attorneys complain about the IRS’ recent decision to withhold tax on an award/reward paid under IRC 7623, it is perhaps that they do not understand withholding tax prevents the viability of the program from being at stake. The IRS, as well as the Director of the Whistleblower Office, has many very difficult decisions to make with respect to the implementation of the IRS Tax Whistleblower program in order to ensure its success…including whether or not to withhhold tax on potentially hundreds of millions of dollars of reward.
IRS to Withhold Tax
A tough decision that was made recently was whether or not to withhold federal income tax on a tax Whistleblower award/reward. There is no dispute that under I.R.C. section 61, the Award/Reward is taxable. As all tax whistleblower attorneys/lawyers are aware, the costs associated with a tax whistleblower receiving an Award/reward (i.e. attorney fees, etc.) is deductible…above the line for awards/rewards paid pursuant to IRC section 7623(b). Congress made sure of that back in 2006 when the new Tax Whistleblower law was enacted. See I.R.C. 62(a)(21). So what is the big deal?
The big deal is simply that the IRS, not knowing the amount of the attorney fees to be paid will withhold tax based upon a fixed percentage of the entire award. Since the normal “contingent” attorney fee is one third of the award, the IRS will withhold on that too. Therefore, if the tax rate is 33.33% the IRS will keep (i.e. withhold) a third, while the Whistleblower gets a third and the attorney working on a contingent basis gets a third. The reality is that in less than 12 months the Whistleblower will file a tax return and receive a refund with respect to any over withholdings by the IRS of the tax withheld due to the costs/attorney fees paid and deducted by the Whistleblower when filing the return. It is a small matter of timing …nothing more. Therefore, no harm no foul.
Many attorneys/lawyers representing Whistleblowers are up in arms that the IRS in the Chief Counsel memorandum from the Procedural & Administration Branch recommended withholding tax on the Award. Perhaps it is because the attorney may not have properly explained to their client that the award is taxable or they continue to talk of the gross reward, when in reality the reward, like any other income, should be viewed as after expenses and taxes.
Can you imagine if the IRS paid out millions (perhaps hundreds of millions) of dollars to a Whistleblower that gambles the award away or simply puts the money out of reach of the IRS. The American taxpayers, as well as Congress, would be furious. The IRS Tax Whistleblower Program would unlikely survive such an ordeal. Again, there are many tough decisions that have to be made. The Tax Whistleblower Program should be viewed as a “public-private partnership” and everyone involved in this program should want to reach the right result for the taxpayer as well as the right result for the Whistleblower.
Tax Whistleblower Attorneys should choose their battles with the IRS and this is not a battle worth fighting. Any litigation of this issue would be moot by the time the court would hear the case as the Whistleblower would have filed the return and received the refund.
However, in an effort to minimize concerns, Director Stephen Whitlock recently mentioned that the Whistleblower Office is considering offering the Whistleblower a “Withholding Agreement” whereby the parties acknowledge what the costs (including attorney fees) are to the Whistleblower and simply withhold on the net amount after the expenses. The IRS is also considering withholding at a 28% rate rather than the maximum individual tax rate.
The Tax Whistleblower Law Firm, established by former IRS Attorneys, are experienced tax attorneys and experienced whistleblower attorneys. The firm has submitted hundreds of cases since the program was begun and to date has had every claim submitted accepted into the progrram. The Tax Whistleblower Program can assist in the litigation/appeal of an Award/Reward as well as in the negotiations of a Withholdings Agreement.
This is clearly the right answer all around. Always feel free to contact a tax whistleblower attorney at the Tax Whistleblower Law Firm at 1-877-404-1040 or email at tom@rewardtax.com.