Tax Whistleblower Anonymity – IRS Whistleblower Program
The IRS Whistleblower Program does not expressly authorize tax whistleblowers to submit tips anonymously and remain eligible for a whistleblower award (unlike the SEC Whistleblower Program). The IRS assures whistleblowers, however, that it will protect their identity to the fullest extent permitted by the law.
The IRS warns whistleblowers that “[u]nder some circumstance, such as when the whistleblower is an essential witness in a judicial proceeding, it may not be possible to pursue the investigation or examination without revealing the whistleblower’s identity.” In these cases, the IRS will inform the whistleblower before deciding whether to proceed.
Tax Whistleblower Anonymity – Tax Court
Tax whistleblowers are required to appeal IRS whistleblower award determinations in U.S. Tax Court. If a whistleblower appeals an IRS award determination, the Tax Court will determine whether to keep the whistleblower’s identity confidential by balancing: (1) the social interests of protecting the identity of the whistleblower with (2) the people’s right to know who is using their courts.
In Whistleblower 12568-16W v. Commissioner, the court permitted the whistleblower to proceed anonymously where U.S. Department of Justice attorneys had informed the whistleblower that the targets were connected with organized crime and terrorism and could resort to physical force or harm in connection with their activities. The court found that the harm that could befall the whistleblower outweighed the societal interest in knowing the whistleblower’s name.
Similarly, in Whistleblower 13412-12W v. Commissioner, the whistleblower was allowed to proceed anonymously where the whistleblower alleged the risk of financial retaliation (loss of pension benefits), social and professional stigma, and economic duress.
In Whistleblower 14377-16W v. Commissioner, however, the Tax Court denied the whistleblower’s request to proceed anonymously. The whistleblower was a retired CPA who had 11 claims pending before the Tax Court involving over two dozen taxpayers, none of which were his employer. He claimed that disclosing his identity to the public would negatively impact his spousal relationship, domestic circumstances, and professional practice. When balancing the social interests of protecting the whistleblower’s identity with the people’s right to know who is using their courts, the Tax Court noted that:
- the whistleblower made no plausible claim that he would be threatened physically;
- disclosure of the whistleblower’s identity would not severely damage his professional standing in the community (the whistleblower was retired); and
- the whistleblower’s tips did not relate to taxpayers who would have the power or likelihood to retaliate against him upon learning his identity (the taxpayers were not his employers, nor did he have a close relationship with the taxpayers).
As such, the Tax Court did not find a need to allow the whistleblower to proceed anonymously.
IRS Whistleblower Awards
Under 26 USC § 7623(b), the IRS is required to issue an award to tax whistleblowers of 15 to 30% of proceeds collected from tax fraud or tax underpayments if:
- the whistleblower provides a tip that the IRS decides to take action on (a whistleblower cannot force the IRS to act on a tip);
- the amount in dispute (the tax underpayment, including interest and penalties) exceeds $2 million (if the taxpayer is an individual, his or her gross income must exceed $200,000 for at least one of the tax years in question); and
- the IRS collects tax underpayments resulting from the action (including any related actions).
According to the Whistleblower Program Annual Report, the IRS issued 418 awards to whistleblowers totaling more than $61 million in FY 2016. This was a fairly typical year for the program in terms of the total amount of the awards issued:
- In FY2015, the IRS issued 99 awards, totaling more than $103 million;
- In FY 2014, the IRS issued 101 awards, totaling more than $52 million dollars;
- In FY 2013, the IRS issued 122 awards, totaling more than $53 million dollars; and
- In FY 2012, the IRS made 128 awards, totaling more than $125 million dollars.
Tax Fraud Whistleblower Lawyers: Call our Leading Washington DC Whistleblower Attorneys Today
The experienced whistleblower lawyers at Zuckerman Law represent tax whistleblowers under the IRS Tax Fraud Whistleblower Reward Program. The firm has a licensed Certified Public Accountant and Certified Fraud Examiner on staff to enhance its ability to investigate and disclose complex tax fraud to the IRS. Firm Principal Jason Zuckerman has been named by Washingtonian Magazine as a “Top Whistleblower Lawyer” and the firm has been ranked by U.S. News as a Tier 1 Firm in Labor & Employment Litigation.
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