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April 08, 2016

IRS Whistleblower Rewards Program; Statistics and Recent News

The tax attorneys at Nardone Limited in Columbus, Ohio, continuously monitor the latest development 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 Whistleblower Program provides an incentive to people to come forward and identify other taxpayers, including individuals and businesses that have failed to pay the tax that they owe.  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 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 discuss the latest IRS statistics involving these two types of awards, as well as, recent news on the latest large IRS whistleblower award.

Whistleblower Statistics

Since 2007, the Whistleblower Office has paid awards in the amount of $403,804,331 based on collected proceeds in the amount of $3,050,441,676. Fiscal Year (“FY”) 2015 was a successful year for the Whistleblower Program. A total of 99 awards were made to whistleblowers, totaling more than $103 million before sequestration. While the total amount of claims received in 2015 were down 17% from those submitted in 2014, the total amount of claims closed increased by 27%.

In FY 2015, the Whistleblower Office closed 10,615 claims. Claims received in FY 2015 an FY 2014 accounted for 79% of closures in FY 2015. The four most common factors for closures, identified by the IRS were: (i) rejected claims with either a non-specific, non-credible, or speculative allegations; (ii) the information was already known to the IRS, lack of resources, or due to a survey; (iii) the issues were below the threshold for IRS action; or (iv) the closure fell into the “other” category.

The following chart represents amounts collected and awards paid under both Section 7623(a) and (b) for Fiscal Years 2013 to 2015.

 

FY 2013

FY 2014

FY 2015

Total Claims Related to Paid Awards

130

240

204

Total Number of Awards Paid

133

101

99

Collections Over $2 Million

6

9

11

Total Amount of Awards Paid

$54,054,587

$52,281,628

$103,486,677

Amounts Collected

$343,674,315

$309,990,568

$501,317,481

Awards Paid as a Percentage of Amounts Collected

15.7%

16.9%

20.6%

Recent News

In one of the latest large whistleblower awards, the IRS awarded a whistleblower $11.6 million. Although the whistleblower chose to remain anonymous, he allowed his attorney to disclose certain facts about the case. According to the whistleblower’s attorney, the whistleblower was a corporation officer who resigned. The whistleblower’s claim involved “a number of very wealthy individuals whom the business helped evade tax.”

The whistleblower’s attorney explained that the road to an award is long, difficult, and uncertain. The whistleblower must provide conclusive evidence of cheating to the IRS, with names, dates, and other relevant information. Further, the attorney stated that the IRS is particularly interested in “one-off, ‘bespoke’ tax shelters” that it might have a hard time detecting, and secret off-shore accounts, especially in Hong Kong, Singapore and Panama. The IRS is also interested in corporate cases that extend over several years. This is because if the statute of limitations expires for one year, the IRS still can pursue taxes for other years.

It is strongly advisable for anyone who wants to file for a whistleblower award to seek help from an attorney who specializes in tax whistleblower cases. Often the attorneys’ fees, which are deductible from the award, come to 30% to 40% of the total amount. Further, large awards typically take about seven years from start to finish. This is partially due to the fact that the IRS will not make a payment to the whistleblower until the taxpayer’s deadline to appeal the case has passed. Even if the whistleblower is able to get through the process and receives an award, the IRS will withhold taxes from the award amount.

Contact Nardone Limited

Nardone Limited frequently represents individuals and businesses in federal and state tax controversy matters. To the extent that you have questions regarding whistleblower claims or defenses, you should contact one of the experienced tax attorneys at Nardone Limited to learn more about the IRS Whistleblower Program.

Please view the site disclaimer regarding the advice on this blog.

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April 08, 2016

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