Tax Law Blog | IRS Tax Attorneys

The IRS whistleblower program allows taxpayers to obtain payment from the IRS for providing information about alleged tax wrongdoing by other taxpayers. According to the new guidance issued by the IRS, there has been a significant increase in the number and quality of informant claims. The guidance sets out a three-step process for handling whistleblower claims.

First, according to the guidance, the IRS Whistleblower Office will review the claims. This will involve adding the claim to the IRS’s tracking system. This will also involve verifying that the claims meet the dollar thresholds set out in the Code. Smaller claims will be forwarded to the IRS’s Ogden Informant Claims Examiner Unit and sent directly to the field for possible audit. The larger claims will be scanned and forwarded to a subject matter expert for a particular Industry.

Second, according to the guidance, the subject matter experts, along with the IRS attorneys, will evaluate the claims and determine how the IRS will handle the claims. In this step, the focus is on reviewing the evidence submitted to determine whether the evidence can be considered or used by the IRS. The IRS is directed to limit contact between the persons reviewing the evidence and anyone that later conducts the IRS audit. This step will also involve screening the claim for fraud issues and the potential for referring the claim to the criminal investigation division.

Third, according to the guidance, the expert and IRS attorney will recommend a course of action to the IRS Industry Director. The Industry Director will then decide whether to proceed with the audit examination. When the case is sent to the field for audit, the IRS Whistleblower Office will continue to monitor the status of the audit.

The guidance does not provide a fourth step to explain how the Whistleblower Office will process payments to the informants. I am guessing that this missing fourth step is the one that many would-be informants have the most questions about.

Presumably, the Whistleblower Office will monitor the audits close enough so that they are able to make payments to informants in a timely manner. Just in case this doesn’t happen, it might be helpful if the guidance had required the IRS audit personnel to notify the IRS Whistleblower Office of the resolution of the audit for claims involving informants.

Source

The IRS whistleblower program allows taxpayers to obtain payment from the IRS for providing information about alleged tax wrongdoing by other taxpayers. According to the new guidance issued by the IRS, there has been a significant increase in the number and quality of informant claims. The guidance sets out a three-step process for handling whistleblower claims.

First, according to the guidance, the IRS Whistleblower Office will review the claims. This will involve adding the claim to the IRS’s tracking system. This will also involve verifying that the claims meet the dollar thresholds set out in the Code. Smaller claims will be forwarded to the IRS’s Ogden Informant Claims Examiner Unit and sent directly to the field for possible audit. The larger claims will be scanned and forwarded to a subject matter expert for a particular Industry.

Second, according to the guidance, the subject matter experts, along with the IRS attorneys, will evaluate the claims and determine how the IRS will handle the claims. In this step, the focus is on reviewing the evidence submitted to determine whether the evidence can be considered or used by the IRS. The IRS is directed to limit contact between the persons reviewing the evidence and anyone that later conducts the IRS audit. This step will also involve screening the claim for fraud issues and the potential for referring the claim to the criminal investigation division.

Third, according to the guidance, the expert and IRS attorney will recommend a course of action to the IRS Industry Director. The Industry Director will then decide whether to proceed with the audit examination. When the case is sent to the field for audit, the IRS Whistleblower Office will continue to monitor the status of the audit.

The guidance does not provide a fourth step to explain how the Whistleblower Office will process payments to the informants. I am guessing that this missing fourth step is the one that many would-be informants have the most questions about.

Presumably, the Whistleblower Office will monitor the audits close enough so that they are able to make payments to informants in a timely manner. Just in case this doesn’t happen, it might be helpful if the guidance had required the IRS audit personnel to notify the IRS Whistleblower Office of the resolution of the audit for claims involving informants.

Source

If you receive an award from the IRS for information provided after December 19, 2006, that substantially contributes to the detection of violations of tax laws by the IRS, you may be able to deduct attorney fees and court costs paid by you in connection with the award, up to the amount of the award includible in your gross income on account of the award, as an adjustment to income.

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