Posts Tagged ‘tax reward’

The Success of the IRS Tax Whistleblower Program (i.e. Payment of Tax Reward) is in the Hands of the IRS.

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 .

 

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:

  1. The IRS has established 5 tax reward brackets (15%, 18%, 22%, 26% and 30%) that will be applied to the amount of tax collected.
  2. In determining a reward, the IRS will begin at the 15% reward bracket.
  3. 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.
  4. 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.

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.

With Tax Knowledge Comes Power for the Tax Whistleblower

The Whistleblower participating in the IRS Tax Whistleblower Program has knowedge and power to receive a substantial tax reward/award under IRC 7623

Confidentiality of Tax Whistleblower

As was made clear by the recent article, U.S. Billionaires Avoid Reporting Cash to IRS by Jesse Drucker of Bloomberg News, there is no shortage as to the underpayment of tax in the United States and therefore the potential for a tax reward.  Some say that the tax gap (the difference of what should be reported and paid versus that which is reported and paid) in the United States is now in excess of $400,000,000,000 per year.  Todaymany attorneys/lawyers, including the Tax Whistleblower Law Firm (former IRS attorneys) assist Whistleblowers in filing and supplementing tax whistleblower claims with the IRS for purposes of claiming a reward, as well as representing the whistlblower before the IRS, attending conferences, and appealing the claim before the U.S. Tax Court.  However, many attorneys/lawyers will not guarantee the confidentiaility of the Whistleblower’s identity as the former IRS attorneys of the Tax Whislblower Law Firm will do.

In the case of Billy Joe “Red” McCombs one must question how many accountants, attorneys/lawyers secretaries and others knew about McComb underreporting of his tax liability and could have filed a 211 Claim for a reward.  Perhaps without the assistance of a tax whistleblower attorney/lawyer these individuals were likely aware of the facts but simply unaware that the tax issue (i.e. a de facto sale of stock) existed or that there existed a Whistleblower Program for which they could have reported the facts and ultimately receive a reward of $3.3 million to $6.6 million (15% to 30% of the amount ultimately collected by the IRS).  Again, with Knowledge comes…a Tax Whistleblower Reward.

The IRS Tax Whistleblower Program is now reaching its 5 year anniversary (i.e. December 20, 2011).  IRS Director Stephen Whitlock, an attorney, has been charged with the duty to implement the law.  An experienced and knowledgable IRS staff of some of the most senior agents has been gathered to evaluate and process the many 211 claims that have been submitted to the IRS.  Currently the IRS Whistleblower Office has maintained its budget for 2011 and will not be losing any employees due to budget constraints or attrition (2 IRS Whistleblower Analysts retired on September 30, 2011), thereby reflecting IRS Commissioner Schulman’s view of the importance of this Tax Whistleblower Program.  The many issues that have arisen under the program are being addressed fairly and methodically by Director Whitlock. 

The Tax Whistleblower Law Firm’s experience in filing claims with the IRS Tax Whistleblower Office over the last four years reflects that our clients are above average intelligence as they are able to apply the facts to the law recognizing the existence of a potential tax issue as well as being aware of the tax whistleblower program.  Despite popular thought, Whistleblowers are largely ethical and are motivated by doing the right thing as opposed to simply chasing the reward.  The reward is simply the bonus.

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 phishing@irs.gov 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.

 

Is the Tax Whistleblower’s Identity protected under the IRS Tax Whistleblower Program?

Answer:  NO! …and therefore Confidentiality is of the Utmost Importance”  for the Tax Whistleblower  Treasury Inspector General for Tax Administration (TIGTA), August 20, 2009.

Tax WhistleblowerWhether it is simply the times, the economy, or the culture, being a tax whistleblower and taking advantage of the IRS Tax Whistleblower Program could be viewed simply as “doing the right thing.”

The risk to a Tax Whistleblower may be tremendous.  There may be the fear of bodily harm, loss of professional license, loss of employment, loss of career, loss of family, etc.

Despite the August 20, 2009 TIGTA Report that recommended that federal legislation be enacted to ensure that tax whistleblowers are protected against retaliation by their employers and be provided with other relief with respect to retaliation, IRS Management correctly stated that such recommendations are outside the jurisdiction of the IRS as to the tax whistleblower program. 

However, the IRS has implemented necessary procedures as set out in IRM 25.2.2 to protect the identity of the Tax Whistleblower and does everything it can to ensure these procedures are followed.   In fact, the reality is that this all the IRS can do without the much needed legislation.   In fact, if the tax whistleblower attorney/lawyer and the IRS protects the identity of a Tax Whistleblower, then the Tax Whistleblower need only worry about disclosing his/her identity through his/her own carelessness, improper use of company email, telephone, etc.  In a recent U.S. Tax Court decision on December 8, 2011, the U.S. Tax Court’s issued an opinion in Whistleblower 14106-10 v. Commissioner, 137 T.C No. 15 (2011) supporting the confidentiality of a tax Whistleblower under certain circumstances.  See TaxWhistleblowerblog.com dated December 12, 2011.

Experienced and knowledgeable TaxWhistleblower Attorneys/Lawyers can act as buffers to further protect the identity of a tax whistleblower by communicating through the use of a drop box or by other means as may be necessary.  Few if any tax whistleblower attorneys/lawyers are as confident as those with Tax Whistleblower Law Firm, LLC, comprised of former IRS attorneys, who are so confident in (i) their abilities as well as their internal procedures, (ii) the IRS, and (iii) the IRS Whistleblower Office that it guarantees the confidentiality of a tax whistleblower in that it is willing to forfeit its fees if the Tax Whistleblower’s identity is ever disclosed by the IRS or by the Tax Whistleblower Law Firm, LLC.

Although nearly all whistleblower’s who report fraud  (i.e. violations of environmental rules, health and safety hazards and political corruptions, government fraud) have some sort of legal protection pursuant to statute, the tax whistleblower does not have such protection, and must, for the time being, rely on the IRS and his/her attorney to protect his/her identity.

In the end, if the tax whistleblower’s identity is protected by the IRS and now by the tax court under certain circumstances.  Therefore, there is no reason to fear any of the retaliation listed above from the taxpayer.  Few Tax Whistleblower Law Firms will guarantee the confidentiality of a tax Whistelblower by contractually giving up their fees if they or the IRS discloses the identity of the Tax Whistleblower.

Senator Grassley Be Patient But Firm with IRS in the Implementation of the Tax Whistleblower Program

Senator Grassley you were quoted by Associated Press (AP) as making several comments that could be interpreted as being critical towards the IRS upon learning of the payment of the first reward under the newly (in the 5th year) created Tax Whistleblower Program.

Whistleblower ProgramOne such comment Senator Grassley, was that you were “surprised” by the payment of the reward.  We were all  nicely surprised.

As you know, the IRS Tax Whistleblower Program is a process that is being implemented over time.   The problem is the statute (IRC § 7623) lacks definition, contains ambiguities and needs clarification.  There are too many issues that still need to be addressed, and if not now, then by the Courts.

Clearly, the program cannot pay a reward to a whistleblower before the IRS does its job.  Taxpayers have been given rights, including the right to receive administrative notice of an examination, the examination itself, the right to appeal, U.S. Tax Court, Collection rights, the right to file a claim for refund after a settlement, right to file suit in District Court, the right to appeal to the Circuit Court of Appeals, etc.  Therefore, it should not be “surprising” to anyone that the process is a long process.  In fact, the only surprise is that this first tax reward was paid in as little as four years as opposed to what is anticipated to be an average of five to seven years from the time the Claim is filed to payment of a reward.  A great tax whistleblower attorney/lawyer can help reduce the examination time but so could changes in IRS procedures.

Having said that, the IRS has taken your prior critique seriously when it redefined the term “collected proceeds” as it is used in the statute.  The IRS expanded its definition of “collected proceeds” in the proposed regulations published on January 18, 2011 so as to comply with Congressional intent.  However, there are many unanswered questions more serious than your initial criticism.   There are many questions that must be resolved now to ensure the success of the program and to avoid expensive and unnecessary litigation.  Numerous comments have been submitted to the proposed regulations and a public hearing will be held on May 11, 2011.  Many of these comments, if considered, will further clarify the program and will greatly shorten the pay off time to the Whistleblower.  Your involvement is important.  To the extent that you can encourage upper management in the IRS to seriously consider and implement these comments it would ensure the success of the program as Congress intended.  The program should be and must be successful as it will go a long way towards achieving effective tax administration.

The second comment was simply that the IRS may have been slow in paying off because it might have been “embarrassed” that it missed the issue involving the unpaid/underreported $20,000,000 in tax that was reported by the whistleblower.    However, as we know, the IRS is very successful in enforcing the Internal Revenue Code.  In fact, it is the most successful tax agency in the world.  It has nothing to be embarrassed about.  The U.S. tax system is a “voluntary” system and the only way to ensure 100% compliance with the law is to fund the IRS to audit every transaction of every taxpayer.  This is not something anyone wants.  However, perhaps there is a lesson to be learned.

In this first whistleblower matter, we had a taxpayer that failed to correct an error that occurred on its original tax return which was ultimately brought to its attention by an accountant.  However, there is no legal requirement that a taxpayer file an amended return to correct an error on the original filed return.  As long as the tax return was accurately filed under penalties of perjury to the best of the taxpayer’s knowledge….then the taxpayer complied with the law.  To the extent an error is later discovered and brought to the taxpayer’s attention, there is no legal requirement to file an amended tax return.  We can learn a lesson from this matter and simply require taxpayers to file an amended tax return under certain circumstances.  Consider the following proposed statute:

Proposed Statute

 A taxpayer must file an amended tax return, or self report the error to the Commissioner, or its delegate, pursuant to regulations within 90 days of discovering that it has underreported/underpaid its tax based upon the following:

1.    the tax year is open for three years from the date the due date of the tax return, including extension, for purposes of examination and assessment of tax, and

2.    the underreported/unpaid tax exceeds $100,000.

 Failure of the taxpayer to self report and/or amend its tax return based upon the above will result in the statute of limitations remaining open for 5 years from the date it would otherwise expire and subject the taxpayer to penalties up three times the underpayment of tax.  The taxpayer shall not be subject to penalties under IRC 6662 upon the filing of an amended tax return under this section.

Senator, your support for the Tax Whistleblower Program is commendable.  Let’s not increase taxes but assist the IRS by (i) encouraging its support of the proposed whistleblower regulations set out in the Comments and (ii) enact the above proposed statute to require a legal obligation by a taxpayer to correct a tax return where it becomes evident to the taxpayer it erroneously underreported/underpaid taxes in excess of $100,000.   

The IRS does its job and need not be embarrassed for not obtaining 100% compliance.

Did Qui Tam Attorney Sell Out Tax Whistleblower Client Upon Receiving Reward?

Confidentiality of WhistleblowerOn April 7, 2011, the IRS paid the first Reward under the IRS Tax Reward Program.   A Qui Tam attorney claimed credit for a claim filed by his client and reports that the client received a 22% tax reward.  With the IRS tax whistleblower program offering rewards between 15% and 30% it appears that the IRS payment of a 22% reward is simply half way between 15% and 30%.  At the conclusion of these tax whistleblower cases, all attorneys should question what more they could have or should have done to maximize the reward.  Good tax whistleblower attorneys will supplement the claim as time goes on with new material and relevant information as it becomes available.  Also, at the request of their client, they will take advantage of the opportunity to administratively and judicially challenge the initial determination made by the IRS if their review of the IRS file so justifies the challenge.  

However, some attorneys are content with any award and submit the Client’s claim (Form 211) hoping for the best.  There are law firms that market the billions of dollars of claims they are responsible in filing perhaps figuring quantity is better than quality.  However, an Attorney has a (ethical) responsibility that begins upon engagement by the client which continues past simply the submission of the claim and typically ends upon payment of the reward.  The attorney should strive to represent the client through the waiting period and through the appeal, if necessary, in an effort to obtain the highest reward possible based upon the circumstances.   Unless waived by the client, the duty of confidentiality continues after the payment of the reward.  Again, the client can always waive their attorney’s ethical duty to protect their confidentiality.

The attorney in this matter reportedly won’t divulge the name of his client often referring to him as Mr. Doe, saying that his client wants to continue working as an “accountant” and fears retribution if he is outed.  The attorney declined to identify the financial institution, except that it was a “Fortune 500 company,” or the accountant who reported the unpaid taxes. The accountant continues to work as an “in-house CPA,” said the attorney.  The accountant discovered the $20 million tax liability and “reported it internally,” but was ignored, according to the attorney.

Despite statements of protecting his client’s identity, below is a summary of facts from the press release and newly created web page of the attorney.  (Note to date the whistleblower has not publically disclosed anything and the IRS is prohibited pursuant to IRC § 6103 from disclosing any details of a Whistleblower Case.) 

Therefore these are the facts that have been disclosed.

* The whistleblower is a CPA.

* The taxpayer is a Fortune 500 financial services firm.

* The whistleblower is employed as an internal accountant with the Fortune 500 financial services firm for at least four years, and to date, is still employed in that position.

* The Fortune 500 financial services firm underpaid its tax.

* It has been over 4 years since the claim was filed so the tax year for which the tax is due is 2006 or prior (more likely 2001 -2004).

* In late 2008 or early 2009 the Fortune 500 financial services firm paid approximately (tax and interest) $20,454,545 (22% of that amount equals $4,500,000, the reported reward).  The exact number paid is likely affected by rounding.

* The accountant attempted to get the Fortune 500 financial services firm to pay the tax before going to the IRS.  Part of the tax due is from the taxpayer claiming tax credits for which it was not entitled.

* The attorney is in Pennsylvania and since the Whistleblower filed his claim pro-se and only later engaged the attorney, it is likely that the taxpayer and whistleblower are both in Pennsylvania.  Just how many Fortune 500 financial service companies are in that area?

Every Whistleblower should be concerned with the extent of confidentiality that will be afforded by their attorney.  The attorney in this case claims to have the consent of his client to disclose such information.   Hopefully the client was well advised as to the potential consequences. 

What does this mean to the Whistleblower?

1.  He is a CPA and could now risk the loss of his license (breach of confidential information).

2.  There is no protection for tax whistleblowers under the Internal Revenue Code; therefore the whistleblower could lose his job.

3.  What records did the Whistleblower take from the taxpayer?  Could he be liable for criminal or civil penalties should he have stolen corporate records for his own gain? 

4.  Was there a breach of fiduciary duty (i.e. duty of loyalty) by the whistleblower to his employer?

5.  Was there a breach of a confidentiality agreement between the employer and the whistleblower.

The Tax Whistleblower Law Firm consisting of former IRS attorneys understands the importance of confidentiality and will guarantee their client’s confidentiality in writing agreeing to forfeit its fee if it or the IRS discloses the identity of the whistleblower.

Senator Grassley, Please take the “Giant Step” to Support the Tax Whistleblower Program

The IRS, and its watchdog, Senator Grassley, have come a long way towards improving the IRS Tax Whistleblower Program with the recently (1/14/11) proposed regulations (Treas. Reg. § 301.7623-1)….but they have not gone far enough.  Attorney Thomas Pliske of Tax Whistleblower Law Firm, LLC believes that Phase One of the IRS Tax Whistleblower Program is the solicitation (by the IRS) of information under the program and ultimate submission of valuable tax whistleblower cases (by the WB) while Phase Two is the litigation of the cases by the IRS and the Whistleblower in order to clarify the drafting of the legislation and the one sided interpretation of the law by the IRS, as reflected in the recently published IRM. 

In fact, this is so likely that the Tax Whistleblower Law Firm, LLC is willing to appeal tax whistleblower cases at no additional costs to its clients.  “Litigation may simply be a necessary step towards proper representation of a client in these matters,” stated Thomas Pliske, who is convinced that any new law is subject to interpretation through litigation.  However, litigation should be unnecessary if both the IRS and the whistleblower are on the same side….working with each other to have others pay the tax that should have been reported and paid.   They simply need to have clear rules in which to play the game.

The Internal Revenue Code is complicated while the tax whistleblower law (IRC § 7623)  is simple thereby making it full of ambiguities and uncertainties.   Senator Grassley was upset with the IRS interpretation of the plain language of the statute, as reflected in the recently published IRM.  He put pressure on the IRS to clarify the term “collected proceeds,” key words of legal significance for which the reward is based and for which drafter of the legislation failed to provide a definition when the statute was enacted.  As a result, the IRS has now issued proposed regulations defining the term.

The proposed regulation simply takes a small step towards supporting Senator Grassley’s intent of the statute from the most offensive interpretation of IRC § 7623 by the IRS.  The IRS had simply interpreted “collected proceeds” as it was written, the amounts that are collected from the taxpayer due to the WB information.  However, after the issuance of the proposed regulations, Senator Grassley now states

“These regulations are good news for whistleblowers. The Commissioner made the common-sense decision of ensuring that individuals who blow the whistle on improper refund claims will be rewarded, as I intended when I wrote the law. These new regulations will help the IRS target tax fraud. This is an issue of fairness for honest taxpayers. I hope these new regulations mean the IRS has turned the corner on encouraging whistleblowers and that this program will be a success. Next, the IRS needs to finalize these regulations quickly so they will apply to all the whistleblowers that filed claims after the 2006 law and have been waiting for their awards.”

There is no doubt about it … the IRS and Senator Grassley supports the IRS Tax Whistleblower Program.  The program, now in its 5th year (enacted December 20, 2006), has yet to pay a reward pursuant to the tax whistleblower’s claim.  That is likely the normal process of instituting a new program and allowing the taxpayer all the rights and appeals that taxpayers have come to deserve over the years. 

However, there is so much more that can be done to improve the Tax Whistleblower program.  Don’t stop now Senator Grassley.  Please continue to encourage tax whistleblowers to come forward and provide information on tax fraud or any underpayment of tax that leads to the determination and collection of taxes by the IRS.  IRS, if you are proposing regulations please clarify your positions on a number of unanswered questions.  Please commit to positions and timelines to make the whistleblower program more effective.  Please discourage future lawsuits by addressing issues early on and not 5 or 10 years from now through litigation.

The IRS is presently gearing up for litigation against whistleblowers having designated GLS Division responsible for such litigation.  The Whistleblower Office has identified many of these issues and they currently remain unanswered.  Please do more with the proposed regulations than addressing the one simple issue stated within the proposed regulation and take the “giant step” towards promoting the tax whistleblower program by providing meaningful regulations.

Currently Tax Whistleblower Law Firm, LLC is soliciting suggestions from others as to how to better improve the IRS Tax Whistleblower Program.

Is the IRS in Transition in Supporting the Tax Whistleblower Program?

Despite recent court decision it appears that the IRS supports the Tax Whistleblower Program Read the rest of this entry »
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