IRS Tax Whistleblower Articles

Panelists Say IRS Asserting No Appeal When Whistleblower Claim Not Pursued

by Allison Bennett

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The Internal Revenue Service is taking the position that taxpayers cannot judicially appeal the agency's decision not to pursue a whistleblower claim, private sector panelists said Jan. 20.

Despite a court challenge on the issue, the governĀ­ment is asserting that "they decide in the first instance whether to proceed," Michelle Kwon, Texas Tech University Law School, Lubbock, Texas, said at the midyear meeting of the American Bar Association Section of Taxation.

Both Kwon and fellow panelist Erica Brady, Ferraro Law Firm, Washington, D.C., noted that the government has said the right of U.S. Tax Court appeal under the revised whistleblower statute applies to the amount of reward that is determined. IRS has challenged the notion t hat that appeal right extends to its decision not to follow up a claim in the first place, they said.

The two panelists discussed a range of issues under IRS's whistleblower program, with Brady noting that the agency's whistleblower office is "growing by leaps and bounds" and now has at least 17 full-time employees.

Processing Discussed

She said the office is now "really good at processing claims into the system," a process that now takes about two weeks. While the office generally delegates claims to IRS's operating divisions where they are handled by subject matter experts, it makes the final decision on the amount of an reward, Brady said.

She stressed that that decision is made not just on the basis of the information submitted, but on its usefulness. "You can provide great information, and if it turns out the information just isn't usable, there's no reward," she said.

However, for informants to determine whether IRS has found their information useful while the claim is still being investigated is a difficult exercise, Brady said in response to questions from the audience.

"You're basically in a dark tunnel for a long time," Brady said, noting that it is important to manage client expectations about the length of the process and the amount of feedback that is likely from IRS. Brady said as the process moves forward, however, IRS may "debrief" informants regarding information that has already been provided.

Brady said when filing a claim for a whistleblower award, informants should provide as much information and as much detail as possible, including where and how to look for "anything you don't have and can't get."

She said even if an informant has been involved in the scheme on which he or she is providing information, a reward is still possible as long as the whistleblower was not involved in planning or initiating transactions. "Anything short of that, it's possible to get some reward, although it may be reduced," Brady noted.