On August 22, two whistleblower attorneys announced that an anonymous whistleblower client had received a $11.9 million award from the Internal Revenue Service (IRS). The whistleblower’s disclosure led to an enforcement action against a Fortune 500 company in which the IRS recovered $55 million in taxes, penalties and interest.
The whistleblower was represented by Dean Zerbe and Stephen M. Kohn, members of the Tax Whistleblower Attorney Group (TWAG) who jointly represented a number of tax whistleblowers, including Brad Birkenfeld, the UBS whistleblower who received an award of $104 million from the IRS in 2012.
“Today’s award showcases the tremendous value of the IRS Whistleblower Program in helping the IRS go after big corporations that aren’t paying their fair share of taxes. As the IRS looks to address the tax gap, it is key that the IRS recognize and embrace the value of the whistleblower award program,” said Kohn, a founding partner of Kohn, Kohn & Colapinto.
“The whistleblower was exactly over-the-plate of what the IRS is looking for when it comes to a good whistleblower submission – a knowledgeable, informed, insider with detailed awareness about specific failures to pay tax. The whistleblower was able to provide a blueprint to the IRS about specific instances where the company failed to properly pay tax. Finally, the whistleblower’s information was about failure to pay tax by the corporation that involved open tax years,” added Zerbe, a founding partner of Zerbe, Miller, Fingeret, Frank & Jadav.
Through the IRS Whistleblower Program, qualified whistleblowers are entitled to monetary awards of 15-30% of the funds collected in the enforcement action connected to their whistleblowing. The IRS weighs a number of factors in determining the exact percentage to award a whistleblower.
“We are especially pleased that the IRS revisited its earlier decision to provide the whistleblower an award of only 15%,” said Kohn. “After we provided additional information that highlighted the significant contributions the whistleblower made, the whistleblower office revisited their decision and increased the award percentage to 22%. We applaud the whistleblower office for having the openness to reconsider their original determination and make the right call. Whistleblowers should be heartened that the IRS whistleblower office looked to make the right decision based on the facts.”
“Whistleblower information has been an incredibly effective aid to IRS compliance efforts,” IRS Whistleblower Office Director John Hinman said in a recent statement for National Whistleblower Day. “Since issuing its first award in 2007 through fiscal year 2022, the IRS has paid $1.1 billion in awards to over 2,500 whistleblowers based on the successful collection of $6.6 billion from non-compliant taxpayers.”
While the IRS Whistleblower Program has been an immense success overall, in the past few years the program has been plagued by issues undermining its effectiveness. Long delays and declining award amounts have led to calls for reforms to the program. For whistleblower advocates like Kohn and Zerbe this $11.9 million award, alongside new leadership and increased funding, is a reason for optimism for the future of the program.
“Individuals who are thinking about blowing the whistle on tax cheats should be heartened by today’s news – as well as the overall good news from the IRS whistleblower office,” explained Kohn. “The whistleblower office stated recently that its awards for this fiscal year were over $70 million dollars – more than double the previous fiscal year. Dean and I have seen the turnaround on awards first-hand with not only this award today, but also with other awards that our clients are receiving that are in the pipeline for this fiscal year and next. Nothing does more to strengthen the IRS whistleblower program and encourage other whistleblowers to come forward than to make awards.”
“On behalf of our client and ourselves, we very much want to thank the Director of the IRS Whistleblower Office, Mr. John Hinman, for this award for our client as well as Commissioner Werfel for his support of the IRS whistleblower program,” said Zerbe. “A particular special thanks to Mr. Michael Bogazis for his good work and professionalism over several years on this filing as well as Ms. Rebecca Paley and Ms. Dawn Applebaum of the Whistleblower Office for their dedication and diligence in helping to make this award happen. Thanks also to the IRS examiners from LB&I who recognized the benefit of the whistleblower’s information.”
Whistleblower advocates are calling for the passage of the IRS Whistleblower Improvement Act, which offers a number of common sense reforms to the program. In April, Kohn authored a piece explaining the importance of the bill.