Top 10 Myths of the Tax Whistleblower Program
Our tax whistleblower attorneys know how to deal with the IRS. They know what types of information and documentation the IRS needs; they know how and to whom that evidence should be presented in order to maximize your reward.
If you have information about large-scale tax underpayments of ANY type, contact us for an honest evaluation of your case.
Top 10 Tax Whistleblower Myths
- The tax whistleblower program only applies to tax evasion and fraud.
- My employer is going to fire me.
- Anybody can help me.
- Foreigners cannot get rewards for reporting tax underpayment.
- A whistleblower case is just like a qui tam suit.
- The IRS will not take this tax whistleblower case seriously.
- My company is broke so there is no point in blowing the whistle.
- All tips are the same.
- I do not know enough to blow the whistle.
- The tax whistleblower program has been around a long time and has not been successful.
The new law that created the Tax Whistleblower Office and drastically amended Section 7623 of the Internal Revenue Code covers more than just cases involving tax evasion and fraud. Under the new law, information about ANY underpayment of tax is eligible to lead to the payment of an award to a tax whistleblower. It does not matter if the underpayment is due to evasion, fraud, an aggressive or negligent application of the law, or even an innocent mathematical error or mistake. Your tax lawyer can help you ferret out the information that is going to maximize your award determination. If you limit yourself to thinking that you can claim a reward only if it relates to “tax evasion and fraud,” you are missing the boat.
At The Ferraro Law Firm, we will work tirelessly to protect your identity. We have a number of ways in which we can help maintain the confidentiality of your identity. It is our goal for clients to provide their information and collect their reward without the taxpayer ever finding out. Besides, firing a tax whistleblower is the last thing a company should do. In many states, firing an employee who provided information pursuant to a federal statute (such as 26 U.S.C. §7623 at issue here) would be an unlawful discharge in violation of public policy that would subject the employer to a lawsuit by the discharged employee. It would be like winning two lotteries, one for the tax whistleblower case, and one for the unlawful discharge.
You should choose your lawyer very carefully. By having tax controversy lawyers who have worked on defending the very types of tax underpayment, evasion or fraud you have information about work for you, you will increase your chance of obtaining the maximum reward from the government. If the IRS does not understand what to do with the information you provide, and your counsel cannot explain it, it is unlikely you are going to get any reward, never mind the maximum reward of 30 percent of the amount collected as allowed by the new law.
Everybody is eligible to get rewards under the IRS whistleblower program. If you are a non-U.S. person with information about ways a company or high net-worth individual underpaid U.S. taxes or engaged in deceptive tax avoidance schemes like tax evasion or fraud, you are eligible to receive a reward from the U.S. government if you come forward and report the tax underpayment. For example, foreigners working in the headquarters of a foreign multinational are ideally placed to identify underpayments by U.S. subsidiaries or branches. In addition, foreigners working in foreign subsidiaries or branches of a U.S. multinational are also in a great place to discover information about how the subsidiary or related entity is being used to underpay U.S. taxes. This commonly occurs through the use of inter-company loans, rents, royalties, license fees, transfer pricing, or the use of tax haven countries.
A “qui tam” suit, which is an abbreviation of a Latin phrase meaning "he who brings a case for the king and himself" does not have anything to do with tax whistleblowers. While there are many skilled qui tam lawyers who bring suits against fraudulent government contractors, they do not bring qui tam tax cases because there is no such thing for federal taxes. As a tax whistleblower, you do not sue the taxpayer. The IRS does all that. Your job is to work with your tax lawyer to provide high-quality information to the IRS. If you feel an award determination is too small, your tax lawyer, who must be licensed to practice before the U.S. Tax Court, can bring suit on your behalf against the government to challenge the award amount.
It will—especially when you have an experienced tax lawyer help you present the information in a way that lays it all out for them. The IRS is very interested in receiving high-quality information. In fact, at the May 2007 meeting of the American Bar Association's Section of Taxation, the newly appointed director of the IRS Whistleblower Office, Stephen Whitlock, said that the IRS's examining agents are eager to receive this new flow of good information.
Do not let the dire financial situation of the taxpayer you have information on deter you from blowing the whistle. The government’s ability to lien and levy property is extraordinary. The IRS often is paid first even in bankruptcy cases. In addition, there may be assets of which you are not aware that the IRS can use to settle a taxpayer’s bill. In certain situations, the assets of the shareholders or partners of a closely held company will be found liable for the tax underpayment.
The fact that your boss just bought an expensive truck is not worth much as a tax whistleblower tip. However, utilizing a lawyer to help you develop the information you have and put it in a format that the IRS can understand and easily act upon can make all the difference in the world to your ability to collect the maximum reward. For example, maybe you have an email that says, “We need to come up with a business purpose for this transaction.” This is a good start and a tax lawyer can help you develop the information about the transaction that will assist the IRS in understanding why this information is relevant to a potential underpayment of taxes. Properly presented information is more likely to lead to an IRS investigation and audit, and a collection of the TOTAL tax underpayment.
With all due respect, let us be the judge of that. Underpayment of tax is a frequent occurrence in the business world. It is the rule rather than the exception. Sometimes it is on purpose and sometimes it is simply a mistake. You could collect on either of them. If you feel something seems off—overstated expenses, debt/equity issues, inflated basis—follow your gut. We have the ability to help you figure it out and we would be happy to help you determine if you have an item worthy of submitting to the IRS. To get started, review the other information we have provided on this site, or simply submit a request for more information concerning how the tax whistleblower program may work for you.
While it is true that the IRS has rewarded informants for quite some time, the December 2006 amendments to Section 7623 of the Internal Revenue Code provide increased financial incentives and protections for tax whistleblowers to encourage them to come forward with good information. Acting with a fresh mandate from Congress, the IRS is more focused than ever on utilizing information obtained from tax whistleblowers. Even under the old “Informant Rewards” program, the IRS paid out millions of dollars in awards to whistleblowers. Under the new tax whistleblower program, the government expects to pay out a much higher dollar amount of rewards to many more potential whistleblowers.
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For answers to other questions about the new tax whistleblower statute or to discuss a potential claim, call our Washington, D.C. or Miami, Florida, area offices or contact us online.
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