Tuesday, October 9, 2012

Attention All Whistle Blowers, The IRS Needs $$$!

It is no secret that the IRS needs money. It’s also no secret that the IRS is paying for information. The IRS’s Whistleblower Office has released its fiscal year 2010 annual report to Congress, and it’s an eye opener. How big is this topic?

The entire Swiss banking industry was brought to its knees because of a whistleblower. That individual still expects to receive a nice chunk of change for the tax dollars his actions are bringing into Treasury Department coffers. See our post Bradley Birkenfeld awarded $104 million (13% ) as UBS tax case whistleblower. Looking beyond the foreign banking controversy, there will be many big tax collections traceable to the actions of whistleblowers.

We may think of this as a new development, but IRS whistleblowing incentives started in 1867! Big changes in 2006 raised the stakes materially, adding new Section 7623(b). Under it, awards to whistleblowers are no longer discretionary. Now, the whistleblower“shall” receive 15 to 30 percent of the collected proceeds.

That’s shall, not may. Procedural safeguards were added too. The 2006 law added whistleblower appeal rights. The IRS then created a Whistleblower Office reporting to the IRS Commissioner. See Whistleblower/Informant Award. Although there was a long dry spell, the first award was recentlypaid. That was good news for many tax whistleblowers becoming tired of IRS delays.

According to the Whistleblower Office fiscal year 2010 annual report to Congress, during fiscal year 2010, the IRS received 431 whistleblower submissions relating to 5,429 taxpayers that appeared to meet the $2 million of tax, penalties, interest, and additions to tax threshold in Section 7623(b). Here is a tabulation:

One source of frustration among tax whistleblowers is that they often turn over what they think is key information to the IRS about a tax cheat, only to find that the IRS can’t seem to turn it into cash. Only actual cash in the IRS’s hands will produce an award to the whistleblower. In fact, in the past, the IRS monitored tax cases to collect proceeds before processing the award claim.

Now the IRS wants to wait to pay claims until the period for filing an appeal has lapsed. The general rule is that a taxpayer may file a claim for refund within two years of the last payment, unless the taxpayer has waived that right. Beginning in July 2009, the IRS started monitoring cases for collection and the lapse of the period for filing a claim for refund. As a result, the IRS did not pay some claims it otherwise would have paid in fiscal year 2009 until fiscal year 2010 or 2011.

If you are the subject of a Whistle Blower or want to make a Claim for an Award as a Whistle Blower, contact the Tax Lawyers at Marini & Associates, P.A. for a FREE Tax Consultation at www.TaxAid.us or www.TaxLaw.ms or Toll Free at 888-8TaxAid (888 882-9243).



1 comment:

  1. The Sprint Nextel case in New York suggests to me that if more states establish their own whistleblower programmes we'll see more effective outcomes than we see under the IRS scheme.


    Posted by Joe Dalton