IRS Tax Whistleblower Articles

Accounting Ethics Rules Give In-House CPAs the Green-Light to Blow the Whistle

By Scott A. Knott and Gregory S. Lynam, The Ferraro Law Firm

October 23, 2007

Washington (DC), The Internal Revenue Service has created the new IRS Whistleblower Office as required by the December 2006 amendments to 26 USCA ยง 7623. The new office will handle all tax whistleblower submissions. Whether a professional can make a submission to the IRS is now more important than ever, because amended section 7623 provides a greatly increased financial incentive - 15 to 30 percent of the total amount collected by the IRS with no ceiling on awards - for individuals with information about tax underpayments.

Professional advisors representing companies or wealthy individuals who have discovered information about large tax underpayments have a strong financial incentive to use the high quality information obtained while servicing the taxpayer in a submission to the IRS Whistleblower Office. The question is what these professionals can do about it. Debate still rages as to whether amended section 7623 of the Internal Revenue Code is a federal statute specifically authorizing disclosure that would override any state or professional organizations' rules against disclosing confidential information for individuals like attorneys and accountants, but the American Institute of Certified Public Accountants Code of Professional Conduct makes it clear that at least one group of CPAs has a green light.

The AICPA adopted The Code of Professional Conduct to provide guidance and rules to all members in the performance of their professional responsibilities. Many states have adopted the AICPA Code. In general, CPAs must, much like attorneys, maintain the confidential information of their clients. See, AICPA rule 301. A key distinction, however, lies in the definition of a client. Under AICPA section 92 - Definitions .03, a client is defined as "any person or entity, other than the member's employer, that engages a member or a member's firm to perform professional services or a person or entity with respect to which professional services are performed." (emphasis added). Because a large portion of the more than one million accountants in the United States are directly employed by the companies and wealthy individuals they service, the AICPA carves out a huge section of accountants in the United States from its rule requiring the maintenance of confidential information. Therefore, in-house accountants are not violating the AICPA Code of Professional Conduct by making a tax whistleblower submission.

A tax attorney specializing in tax whistleblower law can help you determine your ability to make a submission to the IRS Whistleblower Office. If you are interested in more information about this and other topics involving tax whistleblower law visit