Tax Whistleblower May Get $300 Million Award
The IRS Whistleblower Office Pays for Information on Tax Underpayments
In a press release issued by The Ferraro Law Firm, founding partner James L. Ferraro says, "The tax law is not always black and white and taxpayers are all too often more than willing to use an extreme interpretation that drastically reduces taxes. There is not necessarily an element of fraud and people at these companies know the weak spots in their positions."
The action submitted on October 9, 2007 to the newly formed IRS Whistleblower Office involves a company that entered into a string of transactions that improperly reduced its taxes by over $1 billion. The tax whistleblower, whose identity remains confidential, stands to receive an award of up to $300 million if the IRS successfully collects the $1 billion in underpaid taxes.
The new tax whistleblower program was enacted under the Tax Relief and Health Care Act of 2006 (P.L. 109-432). The law gives increased financial incentives to individuals who have any knowledge about companies, trusts, partnerships, or other individuals that underpay taxes. There is no dollar amount cap on the awards to the whistleblowers and awards can earn the whistleblower up to 30% of the underpaid tax that the IRS collects. By law, the minimum award the IRS must pay to a tax whistleblower that makes a substantial contribution to the success of the tax collection is 15% of the amount collected.
Currently, the IRS is only going after the big guys. A tax whistleblower receives awards only if the total amount of the underpayment of the tax, interest, penalties, additions to tax, and additional amounts in dispute that are ultimately collected by the IRS exceeds $2 million. Also, the income of an individual taxpayer who owes tax that has been reported under the new tax whistleblower program must exceed $200,000 in the year the tax was due.
A similar program, the IRS Informant Program has been around for a while. However, the new law that authorized the IRS Whistleblower Office raised the incentives for whistleblowers to come forward with information. There are some common myths about whether or not you should be a whistleblower. To read more about these myths, click here.
Sources:
The Ferraro Law Firm Submits $1 Billion Tax Whistleblower Action Based on Fortune 500 Company's Tax Underpayment
http://www.prnewswire.com/cgi-bin/stories.pl?ACCT=104&STORY=/www/story/10-10-2007/0004679489&EDATE=
The Ferraro Law Firm
http://www.tax-whistleblower.com/
IRS Tax Whistleblower Information
http://www.tax-whistleblower.com/CM/Custom/TOCPracticeAreaDescriptions.asp
Top 10 Myths of the Tax Whistleblower Provisions
http://www.tax-whistleblower.com/CM/Custom/Top-10-Tax-Whistleblower-Myths.asp
Published by Aly Adair
Aly Adair is an Air Force Veteran with a career in teaching and educational publishing. Aly has an MBA and is a former small business owner. View profile
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8 Comments
Post a CommentGood point, Carol - thanks. I copied this from an IRS press release about the new whistleblower program in order to clarify:
"The IRS Whistleblower Office, which was established by the Tax Relief and Health Care Act of 2006, will process tips received from individuals who spot tax problems in their workplace, while conducting day-to-day personal business or anywhere else they may be encountered. A reward worth between 15 percent and 30 percent of the total proceeds that IRS collects could be awarded, if the IRS moves ahead based on the information provided."
The interpretation seemingly put forward by the law firm is troubling. No one should be getting whistleblower money of any kind based on an interpretation of tax law that the IRS later rejects. Awards under whistleblowing statutes should be strictly limited to out and out fraud.
Great Article, Aly.
I wonder if a tax whistleblower would think it was worth it -- even for that kind of money. I'm glad there are people out there who are willing to step up and be whistleblowers, but I doubt I'd do it.
Interesting. Thank You fer sharin'. ;-}}>
I'm glad to have the new information, thanks!
I would be a Tax Whistleblower for free (although, I wouldn't turn down the money--I'd see it as a refund). Our tax system is in a mess. I can't stand to see families struggle to pay taxes while big corporations ride the loops like roller coaster. Great article, Aly.
This is amazing when you think about it. I can understand an incentive to get people to turn in tax evaders, but 30% is awfully high when you consider the US Treasury is in such bad shape. I think they should stay with 15% and whoever gets it should be grateful at that. Great and thoughtfully written piece. Thanks.