Posts Tagged ‘Form 3949’

Tax Reward (IRS Whistleblower Form) versus No Tax Reward

Claim a Reward

Tax Whistleblowers under the IRS Tax Whistleblower Reward Program can report tax fraud or any under payment of tax to the IRS on the proper IRS Whistleblower Form (i.e. Form 211, Application for Award for Original Information).  The Claimant/Whistleblower should follow the procedures in Notice 2008-4 when completing the IRS Whistleblower Form.  In order to prepare the claim for the highest potential reward, the Claimant should try to meet the positive factors stated in IRM 25.2.2.  The 211 Claim is submitted to the IRS Whistleblower Office under 26 U.S.C. Section 7623.  The IRS has created a Whistleblower Office that ultimately reports to the IRS Commissioner.  See Whistleblower/Informant Award.  Many Tax Whistleblower Law Firms can assist the whistleblower in completing the IRS Whistleblower Form, Form 211.  However, make sure the tax whistleblower attorney/lawyer is experienced in the substantive tax law as well.  An experienced tax whistleblower attorney/lawyer will not only assist in the preparation and filing of the IRS Whistleblower Claim Form (Form 211), but will be there for you to supplement the Claim with new information, attend meetings with you and the IRS and appeal your claim administratively as well as judicially to the U.S. Tax Court, if necessary.  The Tax Whistleblower Law Firm will guarantee the confidentiality of the tax whistleblower’s identity.

Tax Reward

Tax Reward v. Risk

Since inception of the program, a cottage industryof tax whistleblower attorneys/lawyers has sprung up to assist tax whistleblowers in these matters.  There are few “tax” attorneys/lawyers that have gotten aboard with this program.  Tax Attorneys/Lawyers know the substantive tax law as well as IRS and Tax Court procedures.  Therefore, most tax attorneys/lawyers recognize that this is a long process that may take years to reach completion, and taking such cases on a contingency basis means it will be years before they get paid, if at all.  The attorneys/lawyers that have gravitated in this new cottage industry are largely non-tax attorneys….personal injury law firms and qui tam law firms, as they are aware that contingency type cases could involve a long wait for payment. 

However, now that the first tax whistleblower award has been paid, there is a renewed interest in this area of the law.  

 Do Not Claim a Reward

Q. Why give up the reward?

A. To remain anonymous your cannot complete an IRS whistleblower form (Form 211).  By claiming the reward the IRS needs to know your identity.  In either situation, the same type of infomration must be provided to the IRS….”specific and credible information.”

  • Form 14242, “Report Suspected Abusive Tax Promotions or Preparers….do not complete IRS whistleblower form (Form 211). 

The IRS has recently posted new Form 14242, “Report Suspected Abusive Tax Promotions or Preparers,” on its website.  The IRS is also concerned about tax preparers and promoters of tax scams.  This new form is to be used to report tax avoidance schemes or tax return preparers who promote them.  Bottom line, Form 14242 is simply another form the IRS has to combat abusive tax practices and tax shelters. 

  • Abusive CPAs, Attorneys or Enrolled Agents:

Submit suspicious actions by tax professionals or inappropriate professionals to the email address of the IRS Office of Professional Responsibility.   All professionals representing taxpayers before the IRS should comply with Circular 230.  Do not complete IRS whistleblower form (Form 211) if you wish to remain anonymous.

  •  Form 3949-A, Information Referral.  Do not complete IRS whistleblower form (Form 211) if you wish to remain anonymous. 

The purpose of this form is simply to report the underpayment/underreporting of tax by a taxpayer.  Again the same type of information is required as if claiming a reward.  However, according to the instructions, you need not give your name and contact information.

For purposes of reporting Fraudulent IRS e-Mails and Websites contact the IRS at if you receive an e-mail claiming to be from the IRS. 

Not only are we all potentially a victim of identity theft, but this is one of the newest hotspots for tax crimes.  Yes, all of the criminals that steal a person’s identity for financial gain fail to report such illegal income.  Be alert for your protection as well as a potential source for claiming a reward.

The Tax Whistleblower Law Firm (former IRS attorney) has been assisting tax whistleblowers in excess of 4 years in the filing of IRS tax whistleblower claim forms (Form 211), attending conferences with the IRS, and appealing Whistleblower Claims to the US Tax Court, etc.


Who Gets Paid When There Exists Multiple Claims: Part Two

Several weeks ago, I wrote a blog about the topic of who gets paid when there exists multiple claims.  After having additional time to mull over the question and after discussions with other former IRS attorneys about the issue, I decided that another blog regarding the issue is merited.  I, and other Tax Whistleblower Attorneys, have determined that this issue is one of the major issues that remains unanswered in this area of the law–What happens when the Whistleblower Office receives multiple claims for reward on the same taxpayer from separate informants?  There does not exist a clear answer to this question based on current published guidance.

This question was posed to Steven Whitlock, head of the Tax Whistleblower Reward Program, at the January 9, 2009 Conference of the American Bar Association–Division of Taxation.  Whitlock responded to the hypothetical by stating that his office has not yet run into this issue because no claims for reward under the new statute are at the stage of determining award amounts.  However, he stated that his office WILL NOT be giving out multiple awards.  Thus, it appears from Whitlock’s statements that the IRS will be choosing between two informants–the victor will receive a full reward, and the loser will receive nothing.  The big question that remains is how will the Whistleblower Office determine who to choose?  Previously, I presumed that the Whistleblower Office would lay a great deal of emphasis on timing–whoever “blows the Whistle first” would be the one who gets paid.  However, Whitlock made comments that seem to suggest that timing is not going to be the driving factor.  Rather, Whitlock stated that the Whistleblower Office would have to determine how each claimant contributed independently to the collection of unreported tax.  Therefore, Whitlock appears to be stating that he will make such determination, of who gets paid, based upon which informant provides the most helpful material to the IRS.  It can be assumed from Mr. Whitlock’s comments that timing will only be a factor where the informants provide equally valuable material.  

Now, let’s attempt to apply Mr. Whitlock’s thought process to a few examples:

Example (1):  On January 1, 2008, Informant A, who is a secretary at Corp. B, files a Form 211 Whistleblower claim with the Whistleblower Office.  Informant A provides credible and substantial information to show that Corp. B is involved in an abusive tax shelter.  Informant A’s information is good information, but general.  However, with a substantial amount of work, the IRS could use the information of Informant A to collected underreported tax of Corp. B.  On January 1, 2009, and while the IRS is still auditing Corp. B because of the tip provided earlier by Informant A, Informant C files a Form 211 Whistleblower claim with the Whistleblower Office.  The Whistleblower claim of Informant C is for the same taxpayer, Corp. B, for the same years, and is for the same abusive tax shelter.  However, Informant C is the former tax director of Corp B.  The information provided by Informant C is very specific and extensive.  Informant C provides contracts, logs, and other documents that clearly show that Corp. B was involved in the abusive tax shelter.  Based on the information provided by Informant C, the IRS is able to immediately issue a statutory notice of deficiency to Corp. B.  It would have taken another year of the audit to obtain the same information if Informant C had not come forward.

The information provided by Informant C is clearly more helpful to the IRS when compared side-by-side with the information provided by Informant A.  Thus, at first glance, one might say that Informant C should receive the reward and Informant A should not.  Interpreting the comments of Mr. Whitlock, this is the answer that I presume he would reach in this factual situation.  However, now consider Example (2):

Same facts as Example (1) except the Informant A does not complete a claim for reward under the Whistleblower program.  Instead, Informant A voluntarily provides the information to the IRS utilizing Form 3949-A and does not request a reward.  Do you still think that Informant C should get a reward?  No.  Clearly, in this situation the IRS Whistleblower Office would use one of its standard reasons for rejecting the Whistleblower claim of Informant C–that the IRS already had initiated an audit of Corp. B and already had identified the issue–with the help of Informant A–that is the subject of Informant C’s claim.  Based on established practices of the IRS, the IRS would not reward Informant C for information that the IRS would have obtained on their own, and the audit was already begun and the issue identified.

So, why does the Whistleblower Office obtain a different answer based on whether Informant A is seeking a reward or not?  I maintain that the answer of the Whistleblower Office should be the same for both Examples.  To bring fairness and stability to the Whistleblower program, I believe that timing should be the overriding concern.  If the Whistleblower Office obtains credible and specific information that would lead to the collection of underreported tax, the Whistleblower’s office should be rewarding the first Whistleblower and rejecting the claim of the second Whistleblower even if the second Whistleblower’s information is more complete.  As stated in my earlier blog, timing also brings a bright line test rather than a blurred facts and circumstances analysis to the issue.   

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