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January 06, 2016

IRS Whistleblower Rewards Program; Eligibility and Information Considered

The tax attorneys at Nardone Law Group in Columbus, Ohio, continuously monitor the latest developments in the Internal Revenue Service’s efforts to identify and pursue taxpayers, who the IRS believes have failed to report or pay taxes owed to the IRS. The IRS uses this Whistleblower Program to further its efforts to identify and ferret out taxpayers it believes are committing wrongdoings regarding the failure to report and pay their tax liabilities. If the IRS ultimately uses the information provided by the whistleblower, the IRS may award the whistleblower up to 30 percent of the additional tax, penalty and other amounts the IRS collects. In a previous article, “IRS Whistleblower Rewards Program,” we discussed the two types of award programs available to whistleblowers. This article will supplement our prior article by expanding the discussion to include information on who is an eligible whistleblower claimant and what type of information the IRS looks for when it reviews a whistleblower submission.

Am I an Eligible Claimant?

While the Internal Revenue Code does not specifically exclude any whistleblower from filing a claim for an award, awards under I.R.C §7623(b) are limited to individuals. Moreover, I.R.C. §7623(b)(3) requires the Whistleblower Office to deny an award to a whistleblower convicted of a crime arising from the whistleblower’s role in planning and initiating the actions that led to the underpayment of tax or violation of the internal revenue laws. Furthermore, an individual who is otherwise required to disclose information or precluded from disclosing information by federal law or regulation is not eligible to claim an award for providing such information.

What Does the IRS Look for in a Submission?

A threshold requirement for an award under I.R.C. §7623 is that the information must lead to judicial or administrative action and the audit or investigation must result in the collection of proceeds. When a whistleblower submits a claim, an analyst in the Whistleblower Office will consider the information and decide whether the case is worth pursuing. Furthermore, the Whistleblower Office will determine if the information received is specific and credible. This includes identifying a person and describing and documenting the facts that support the whistleblower’s belief that the person owes taxes or violated the tax laws. This does not mean, however, that a whistleblower must identify a taxpayer by name. The whistleblower just needs to include enough identifying information that the IRS and the Whistleblower Office will be able to identify a taxpayer. The more identifying information that a whistleblower includes in the submission, the more likely it is that the submission will be considered.

If the IRS uses the information provided by the whistleblower, the Whistleblower Office must determine if the IRS proceeded based upon the information provided by the whistleblower. This occurs when the information substantially contributes to the underlying action. As an example, a whistleblower’s information substantially contributes to the underlying action if it leads to: (i) an examination; (ii) an expansion of an issue already being examined; (iii) an expansion to the examination to another year; or (iv) an additional adjustment. Information that just merely supports information obtained independently by the IRS, however, does not substantially contribute to the underlying action.

Contact Nardone Law Group

Nardone Law Group frequently represents individuals and businesses in federal and state tax issues, including both representation and defense against whistleblower claims. If you have information on an individual or business that has failed to report or pay taxes it owes to the IRS, or you are being investigated or prosecuted by the IRS, you should contact one of the experienced tax attorneys at Nardone Law Group to learn more about the Whistleblower Program. We will thoroughly review your case to determine what options and alternatives are available.

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January 06, 2016

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