Posts Tagged ‘Tax Whistleblower Program’
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.
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.
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
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.
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.
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.
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 firstname.lastname@example.org 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.
The Whistleblower participating in the IRS Tax Whistleblower Program has knowedge and power to receive a substantial tax reward/award under IRC 7623.
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.
On September 13, 2011 Senator Grassley responded to the GAO Report that was issued pursuant to his request to audit the IRS Tax Whistleblower Program. Senator Grassley’s letter praised the IRS for its progress and yet pointed out the downfall of the program and what he hoped that the IRS would do better in the future.
“While the IRS has made great progress, there is still room for improvements.”
Senator Grassley (September 13, 2011)
It is clear the IRS has a ways to go in properly implementing the IRS Tax Whistleblower Program as it was intended by the Congress. The Federal False Claims Act has been around for over 150 years.
Clearly the IRS does not need to reinvent the wheel on how to make partial payments or to define certain terms as the tax whistleblower program grows. Senator Grassley noted this and much much more. As Senator Grassley pointed out, Tax Whistleblowers are experts sometimes as to the facts and sometimes as to the law. The IRS must begin communication with the tax whistleblower as a cost saving measure if for no other reason.
Senator Grassley noted the great initial success of the tax whistleblower program by noting the multiple claims that have been submitted for millions of dollars. In fact the first claim paid under the program was for over $20,000,000 and goes a long way in justifying the cost of properly implementing the program.
We note that Senator Grassley brought to the IRS Commissioner’s attention a number of items for whichhe hope would be changes in the future to better implement the tax whistleblower program.
- Whistleblower Advocates v. Whistleblower Analyst – Congress intended that the whistleblower office would advocate for the whistleblower as opposed to simply processing paper.
- Whistleblower Office Independence – The office should be independent of the other branches of the IRS (SBSE, LB&I, CI, TEGE, Etc.) and should not simply follow their lead in denying a reward (claim did not substantially contribute to the determination of tax) or refusing to engage in an examination.
- Whistleblower Counsel - The IRS Whistleblower Office should have its own legal counsel separate and apart from the Office of Chief Counsel attorneys which advise the examination divisions of the IRS. Independent tax whistleblower attorneys could provide advice faster to the IRS Whistleblower Office if it was within house.
- Time period of Payment of the Award - The IRS should work on shortening the period of payment of the award.
- Better Communication between IRS and Whistleblower – The IRS should state with specificity the reason of rejection if it is rejecting a Claim thereby saving unnecessary litigation time and costs.
The Tax Whistleblower Law Firm will send a series of six (6) letters to Senator Grassley commenting on his recommendations and providing specific suggestions as to his recommended changes.
Of course questions will still be answered and advice will still be given to anyone who wishes to call the Tax Whistleblower Law Firm at 1-877-404-1040 or email Tom@rewardtax.com. Normally such questions are about 1) the IRS whistleblower program, 2) the Tax Whistleblower Law Firm, and /or 3) the general/specific situation that the individual may be call about. All phone calls are answered by a former IRS attorney and are kept confidential.
However, the newly created tax whistleblower forum is opened to everyone, attorneys and whistleblowers so as to contribute their knowledge, opinion and experience to in order to enhance the IRS Tax Whistleblower Program.
Former IRS Attorney Thomas C. Pliske believes that comments about the program and the IRS could contribute to the success of the IRS in the implementation of the tax whistleblower program. Many tax whistleblowers that have had their claims rejected may wish to make comments and share their frustrations with others. Others may just wish to ask questions to expereinced and knowlegable tax whistleblower attorneys/lawyers with respect to the IRS Tax Whistleblower Program.
Senator Grassley (sponsor of IRC § 7623(b)) asked why does it take so long for the IRS to pay a tax whistelbower claim. The same question is asked by Tax Whistleblowers and non-tax attorneys representing tax whistleblowers? The answer is obvious. But, one must understand the federal tax system and the complexity of IRS tax procedures. Therefore, if your attorney has been unable to answer your question, consider finding an attorney that understands federal tax procedures because this is a long process, and even if your 211 claim has been filed, you have a long road of ahead of you and you need a tax attorney that knows tax procedures. Your attorney still has a lot of work to do but this will be saved for a later blog.
The answer is simple….the taxpayer does not lose any of their rights (i.e. Taxpayer Bill of Rights) just because the IRS has been provided with “specific and credible” information with respect to the underreporting/underpayment of tax (i.e. 211 Claim). As Americans, and as taxpayers, we would not want any of our rights to be taken away, nor should they. Therefore, below is roughly the process by the IRS and the courts. You should note that after the examination is completed (i.e. Step 2 below), the taxpayer has the right to settle with the IRS, pay the tax, thereby eliminating Steps 3, 4 and 5.
Step 2: Examination of the tax return. If the IRS determines that it is in its best interest, the Whistleblower Claim/case will be forward to the field for examination and the tax return will be examined by an IRS Revenue Agent. (Estimated time 12 – 18 months)
Step 3: Appeals. If the taxpayer wishes to appeal the results of the examination, the taxpayer may file a “protest” with the examination division to have appeals office, within the IRS, take an independent look at the results of the examination. A taxpayer should be aware that appeals may raise additional issues. (Estimated time 12 – 18 months)
Step 4: Litigation. Most taxpayers, if they litigate, will litigate the tax issues in the U.S. Tax Court (where the payment of tax is not required) rather than U.S. Federal District Court or U.S. Court of Federal Claims. (Litigation, including waiting for the Court’s decision estimated time 24 – 36 months)
Step 5: Collection. There is a 10 year statute of limitations on collection. However, most taxpayers will pay their tax liability when they receive the bill (approximately 6 months after assessment) in order to stop the running of interest and to prevent an additional penalty for failing to timely pay the tax. The Internal Revenue Manual states “…a final determination of tax does not occur until the statutory period for filing a claim for refund expires or there is an agreement between the taxpayer and the Service that there has been a final determination of tax for a specific period and a waiver of the right to file a claim for refund is effective.”The taxpayer has 2 years to file a claim from the date of payment. If a law suit is filed by the taxpayer upon the denial of a claim for refund, this could be an additional 24-36 months of litigation.
Step 6: Payment of the Reward. No rewards have been paid at the time of this blog. However, the IRS has established procedures in the recently published Internal Revenue Manual. If the whistleblower accepts the IRS determination of the reward it is estimated that the processing of the reward for payment will take 6 months.
Step 7: Appeal of IRS determination of the Reward. Again, no rewards have been paid to date, and therefore no appeals of the reward to the U.S. Tax Court have been filed. However, if appealed, it is estimated that the appeal could take 12 – 18 months.
Step 8: Upon completion of the appeal, the IRS whistleblower office must make payment (i.e. Step 6). Therefore the processing of payment the claim is estimated to take 6 months.
The Tax Whistleblower Law Firm has filed Tax Whistleblower Claims as to hundreds of taxpayers for billions of dollars and, to date, every claim filed has been accepted into the IRS whistleblower program.
Step 1: Claim submitted to the IRS Whistleblower Office. The claim is surveyed, analyzed, scanned for (civil or criminal) fraud, and determined if the information is tainted (stolen, privileged, etc.) (Estimated time 4 -6 months)