IRS Tax Whistleblower Articles
Whistleblowers Hope for an Ally at IRS
By Henry Cutter
Apr 27, 2018
Tipsters have helped the Internal Revenue Service collect $3.6 billion since 2007. Whistleblower lawyers hope Charles Rettig, the potential next leader of the agency, will take it easier to bring in still more cash.
Mr. Rettig, a California tax lawyer, is President Donald Trump’ nominee for IRS commissioner. He has worked extensively with people caught up in issues resulting from the U.S. effort to root out cash stashed overseas, in addition to other criminal and civil matters.
The right person at the helm could help tackle issues such as the amount of time it takes for the agency to handle claims, improve communication with whistleblowers and make sure awards are paid, said users of the IRS Whistleblower Program. That could encourage more whistleblowers to come forward, saving money for taxpayers by helping the agency uncover additional fraud, they said.
“It’s not that they’re unsupportive of it but maybe haven’t seen all of the opportunities it offers,” said Dean Zerbe, a whistleblower lawyer at Zerbe Miller Fingeret Frank & Jadav LLP, of the IRS leadership. “I think [Mr. Rettig] more readily will understand the benefits of the program.”
Robert Patten, chief executive and president of Taxpayers Against Fraud, an advocacy group for whistleblowers, said he also is optimistic.
The IRS said its leadership and staff support the program and continue to seek ways to improve it.
“Whistleblowers play an important role in our tax system by helping the IRS collect billions of dollars that otherwise would have been lost,” and helping to ensure voluntary compliance, said the agency. The program’s latest report to Congress notes it implemented nine of 10 recommendations raised by a 2016 audit.
Mr. Rettig hails from the California law firm Hochman Salkin Rettig Toscher and Perez PC, which specializes in tax disputes. It describes him as the first “tax person” to head the agency since 1997.
“For the handful of boutique tax firms that do criminal work it’s natural to see people who are up to their eyeballs in tax mischief,” said Mr. Zerbe. That exposure gives Mr. Rettig an understanding of the wealth of tips people dealing with difficult tax problems could provide, he and other lawyers said.
The nominee twice led negotiations with the IRS resulting in thousands of taxpayers coming into compliance with U.S. tax law, according to his profile page at Hochman Salkin. Mr. Rettig, nominated in February to succeed John Koskinen, didn’t respond to requests for comment. No hearing date is set for his nomination.
Mr. Rettig is on the record as a fan of the whistleblower program. “Tax whistleblowers provide valuable leads and often offer unique insights into compliance-challenged taxpayers,” he wrote in 2016 in the Journal of Tax Practice & Procedure.
He weighed in in 2013 on a fight between whistleblowers and the IRS over what funds the IRS can share with whistleblowers as awards. Congress “should resolve the ambiguities in favor of whistleblowers,” wrote Mr. Rettig.
Congress did that in February, passing legislation to make it clear whistleblowers can share in a broader pool of cash.
Backing from Mr. Rettig could help address other issues such as long waits for payment, said users of the whistleblower program. Claimants who received their money in the 12 months ended Sept. 30 waited an average of seven years, according to the whistleblower program’s fiscal 2017 report to Congress.
The IRS has said long waits are to be expected because the service pays awards from funds it has collected and can’t pay until a taxpayer has exhausted their right to appeal and can no longer claim a refund.
If a tipster makes a claim that affects several years of taxes, the person won’t be paid until all matters connected with each return are resolved, said Scott Knott, a whistleblower lawyer at the Ferraro Law Firm. Minor issues tangentially related to a whistleblower’s claim can hold up a payout for years, he said.
A potential solution would be to allow payouts as each year’s return is settled, said Mr. Knott. The IRS declined to comment.
Another sore point is ambiguity over which cases should yield payments. Bryan Skarlatos, a lawyer at Kostelanetz & Fink LLP who represents clients on sensitive tax issues, said the field officers who handle successful investigations tell the Whistleblower’s Office whether the information a tipster provided helped bring in cash. If the answer is “no,” a whistleblower may want to learn more about why the agency took that position.
The Whistleblower’s Office at this point doesn’t conduct a full investigation of why the field agents believe a whistleblower shouldn’t be paid. Mr. Rettig could work with the Whistleblower’s Office to ensure such analysis is done. That could identify cases where a whistleblower should have gotten an award, said Mr. Skarlatos.
A third friction point is communication between the IRS and whistleblowers, who say investigators rarely draw on their expertise. “We can help you with the case if you let us,” said Michael Lissack, a client of Mr. Knott who has brought two separate matters to the whistleblower program.
Cooperating is tricky, according to the IRS. The agency is barred from divulging information about taxpayers so it generally can’t discuss problems with a return with a tipster after an initial interview.
The IRS supports legislation proposed in the Senate last year to allow it to share information with a whistleblower to advance an investigation, said the report to Congress. The bill requires the IRS to give whistleblowers updates on investigations.
“You hear nothing” about IRS claims at present, said Mr. Lissack.