The IRS just released its annual report on the whistleblower program – showing over $616 million dollars brought into the Treasury thanks to the work of tax whistleblowers speaking out about tax evasion. While the awards to tax whistleblowers is not as high as last year’s record of a collection of over $1.4 billion dollars and $312 million in awards – the awards for FY 2019 are still a solid $120 million (by comparison a marked improvement still over the $33.9 million in FY 2017 awards).
The trend is clear that the IRS has embraced the modern mandatory tax whistleblower program created by my old boss Chairman Charles Grassley (R-IA) – and it is honest taxpayers who have most benefited. Credit to the director of the IRS whistleblower office Lee Martin and his team for getting these awards out (as well as the support from IRS Commissioner Charles Rettig for the program).
The report makes note that the clarification in the law (26 U.S.C. 7623(c)) that whistleblowers can be paid for FBAR violations (undeclared foreign bank accounts) as well as criminal fines has been a key – with $110 million of the $616 million collected based on that clarification of the law. From my own practice representing tax whistleblowers, it is clear that the IRS continues to take a strong interest in receiving information from informed whistleblowers about offshore accounts and criminal tax activity. Interesting, the report highlights for the first time that the IRS received 282 submissions from whistleblowers overseas last year. Being a foreign national is certainly not a bar to blowing the whistle to the IRS – and receiving an award.
The report highlights again (as Director Martin has as well on numerous occasions publicly) that the top reason – 51%! — a whistleblower submission is rejected is because the submission is not specific (table 4). The IRS does not want submissions that are speculative. The IRS wants and welcomes submissions that are grounded – particularly those coming from credible whistleblowers — containing known facts, dealing with specific taxpayers and ideally, with documents in hand and involving recent/current tax evasion.
I’m honored that my clients (including clients with whom I’ve co-counseled with the good folks at KKC law firm) for the year covered by today’s report received roughly half of the awards provided. However, from that perspective, I can only reinforce what the IRS report is stating — that it takes a whistleblower submission that hits all the right notes and is presented clearly and concisely to have a chance of the IRS taking action and possibly resulting in an award.
Finally, the report also highlights a continued trend in Table 2(B) that whistleblower filings about tax evasion that are of interest to IRS criminal investigators (tax fraud; offshore accounts; failure to report income; failure to file) as well as tax evasion by large businesses get a great deal of interest and attention from the IRS. The IRS clearly sits up and pays attention when a whistleblower is coming in with a strong understanding of the tax issues at play and who is informed (particularly an insider).
Dean Zerbe draws on a career in government service — including eight years as tax counsel for the Senate Finance Committee — to comment on tax law and policy. This column first appeared in Forbes.