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By Matthew E. Estes
Better late than never. The IRS has cut its first check under a 4-year-old whistleblower program that targets major tax cheats.
According to a recent Associated Press report, the IRS has sent a $3.24 million check to the attorney of an accountant in a Philadelphia suburb who blew the whistle on a financial services company. Information provided by the unnamed tipster helped the IRS conduct a more thorough audit than the routine review that the IRS had already initiated.
The anonymous accountant received 22 percent, or $4.5 million, of the $20 million the IRS collected from the company, but that award was reduced by 28 percent due to taxes. The check he received was the first award issued under this whistleblower program, according to the AP.
The IRS Whistleblower Office was established by the Tax Relief and Health Care Act of 2006. The law charged the office, which announced its first director in February 2007, with processing tips about significant tax abuse. Even though a federal law dating back to 1867 authorized the Secretary of the Treasury to grant awards to tax whistleblowers, payouts to such tipsters prior to 2006 were made on a discretionary basis.
Under IRC Section 7623(b), the IRS is directed to pay tax whistleblowers 15 to 30 percent of the amount collected when a tax noncompliance matter yields over $2 million in tax, penalties, interest, additions to tax and additional amounts. Awards can also be given for tips relating to individual taxpayers whose gross incomes exceed $200,000 for the years in question.
The IRS Whistleblower Office received 460 whistleblower submissions that appeared to satisfy the requirements of the 2006 law. Those tips concerned 1,941 taxpayers, but as of last December the agency did not know how many of the cases would result in collections, according to its 2009 annual report.
As the AP story noted, the Philadelphia whistleblower filed his complaint with the IRS in 2007. Two years later, he hired an attorney to push the issue after not hearing back from the agency. As this case illustrates, working with the IRS as a whistleblower can be as frustrating as when a taxpayer works in opposition to an unmerited tax collection action initiated by the agency. People with knowledge of significant instances of tax noncompliance and wanting to blow the whistle on major tax fraudsters should contact a federal whistleblower law attorney.
Matthew D. Estes is an associate with Tully Rinckey PLLC working in the firm’s federal employment and labor law group. Matthew can be reached at mestes@fedattorney.com. To schedule a meeting with one of Tully Rinckey PLLC’s experienced employment law attorneys call 202-787-1900.
