The IRS Whistleblower Office is a branch of the United States Internal Revenue Service that 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."[1] Tipsters should use IRS Form 211 to make a claim.
| Agency overview | |
|---|---|
| Formed | February 2, 2007 |
| Jurisdiction | Federal government of the United States |
| Headquarters | Washington, D.C. at the Internal Revenue Service Building |
| Agency executive |
|
| Parent agency | IRS |
| Website | www |
History and operations
To motivate people to notify the IRS of first-hand knowledge of tax-evasion schemes, the U.S. Congress directed the IRS to pay tipsters at least 15% and as much as 30% of taxes, penalties, and interest collected in cases where $2 million or more is at stake.[2] Section 406 of the Tax Relief and Health Care Act of 2006 called for the creation of a Whistleblower Office within 12 months to handle potential incoming whistleblower claims. President George W. Bush signed the act on December 20, 2006. U.S. Senator Charles Grassley (R-IA), chairman of the Senate Finance Committee, modeled the act creating the Office and its reward system after the False Claims Act, which allows people to file actions against federal contractors committing fraud against the US government.[3] For fiscal year 2006 alone, the Justice Department reported that over $3 billion was collected directly as a result of Whistleblower claims and resulting lawsuits.
On February 2, 2007, the IRS named Stephen A. Whitlock as Director of the new Whistleblower Office.
In 2008, $65 billion in unreported income was alleged by tipsters.[2]
On April 16, 2012, in the Internal Revenue Bulletin, the IRS announced final regulations (Treasury Decision 9580) about rewards and awards to whistleblowers and their representatives.[4]
On June 7, 2012, the IRS issued more guidance covering whistleblowers and their representatives.[5]
Effective August 1, 2012, the Whistleblower Award Determination Administrative Proceeding procedures and Internal Rrevenue Manual 25.2.2 have been modified.[6]
According to John McDougal, speaking on his own behalf, at an American Bar Association Section of Taxation webcast, "whistleblower data is the second most important source of information for the IRS's international enforcement efforts."[7] According to McDougal, the primary source of information is through the offshore voluntary disclosure initiative.[7]
History of taxation of awards under FCA
The US Internal Revenue Service treats payments made to a whistleblower under the False Claims Act as ordinary income and not as capital gains. The IRS's position was challenged by a relator in a case called Alderson, v. United States, and in 2001 the circuit court upheld the IRS' stance. As of 2013 this remains the only circuit court decision on tax treatment of these payments.[8]
Awards
In its 2013 Annual Report, the IRS stated that it paid $53 million in awards to 122 whistleblowers for information which led to the recovery of $367 million[9] in unpaid taxes.
As of July 16, 2012, in 2012 fiscal year, the Whistleblower Office has approved over 90 awards.[7]
In September 2012, the IRS Whistleblower Office awarded Bradley Birkenfeld $104 million as a whistleblower for providing information about more than $5 billion in unpaid taxes from banks and individuals.[10][11][12]
In October 2012, IRS Whistleblower Office awarded $38,037,899 to one corporate whistleblower but "the amount of tax the IRS collected from the company was not revealed" and "name of the company" was not revealed.[13]
In October 2012, the Whistleblower Office awarded a "$2 million reward to a whistleblower who exposed an alleged tax avoidance scheme by Illinois Tool Works, Inc. (ITW) that cost the U.S. Treasury hundreds of millions of dollars".[14][15]
| Amounts Collected and Awards Paid under IRC section 7623 FY 2008-2012 (as of 9/30/2012) | |||||
| 2008 | 2009 | 2010 | 2011 | 2012 | |
| Cases Received | 3,704 | 5,678 | 7,577 | 7,471 | 8,634 |
| Awards Paid | 198 | 110 | 97 | 97 | 128 |
| Collections over $2,000,000 | 8 | 5 | 9 | 4 | 12 |
| Total Amount of Awards Paid | $22,370,756 | $5,851,608 | $18,746,327 | $8,008,430 | $125,355,799 |
| Amounts Collected | $155,985,834 | $206,032,872 | $464,695,459 | $48,047,500 | $592,498,294 |
| Awards paid as a percentage of amounts collected | 14.3% | 2.8% | 4.0% | 16.7% | 21.2% |
In Popular Culture
On June 20, 2012, Mordy Mandell wrote a rap poem "that teaches you everything you need to know about IRS whistleblowing."[16]
Oversight of Whistleblower Office
The Whistleblower Executive Board[17] is composed of:
- Director of the Whistleblower Office, chairperson
- Assistant Deputy Commissioner for Services and Enforcement, member
- Deputy Commissioners of the Large Business and International (LB&I) Division, member
- Deputy Commissioner and the Small Business/Self-Employed (SB/SE) Division, member
- Deputy Chief of Criminal Investigation, member
- Division Counsel for LB&I, member
- Division Counsel for SB/SE, member
The Whistleblower Operations Committee[17] is composed of:
- Program Manager, Case Development of the Whistleblower Office, chairperson
- its members include senior managers from:
- LB&I,
- SB/SE, and
- the Whistleblower Office and Criminal Investigation.
References
- ^ "Whistleblower Office At-a-Glance". IRS. 5 April 2013. Retrieved 22 November 2013.
- ^ a b Novack, Janet; William P. Barrett (2009-12-14). "Tax Informants Are On The Loose". Forbes.
- ^ The Associated Press (Posted 6/19/2004 11:55 AM Updated 6/19/2004 11:59 AM). "Feds hope whistle-blowers can knock out tax shelters". USA Today. Retrieved 17 May 2014.
{{cite web}}: Check date values in:|date=(help) - ^ "T.D. 9580 - Rewards and Awards for Information Relating to Violations of Internal Revenue Laws". US Internal Revenue Service. Retrieved 2012-07-19.
- ^ WHITLOCK, STEPHEN. "MEMORANDUM FOR DISTRIBUTION FOR WHISTLEBLOWER OFFICE EMPLOYEES" (PDF). US Internal Revenue Service. Retrieved 2012-07-19.
- ^ "Updates to Internal Revenue Manual (IRM) 25.2.2 Information and Whistleblower Awards, Whistleblower Awards" (PDF). US Internal Revenue Service. Retrieved 2012-08-15.
- ^ a b c Arora, Jaime. "WHISTLEBLOWER TIPS A BIG HELP IN IRS'S INTERNATIONAL CRIMINAL ENFORCEMENT-2012 TNT 159-1". Tax Analysts Tax Notes Today.
{{cite web}}:|access-date=requires|url=(help); Missing or empty|url=(help) - ^ Robert W. Wood and Dashiell C. Shapiro Blowing the Whistle on Taxing Whistleblower Recoveries Tax Notes, December 2, 2013. pp. 983-988
- ^ Brown, Howard. "$53 Million Paid to Whistleblowers in 2013".
- ^ Temple-, Patrick (September 11, 2012). "U.S. IRS awards $104 million to UBS tax case whistleblower". Reuters. Retrieved September 11, 2012.
- ^ Coder, Jeremiah (September 2012). "IRS PAYS BIRKENFELD $ 104 MILLION WHISTLEBLOWER AWARD. (Section 7623 -- Expenses of Detecting Frauds)". Tax Notes Today. 2012 TNT 177-1 (177).
- ^ Sheppard, Lee A. (September 12, 2012). "NEWS ANALYSIS: SWISS BANKING DEROBED: INTERNATIONAL IMPLICATIONS OF BIRKENFELD". Tax Notes Today. 2012 TNT 177-2 (2012 TNT 177-2).
- ^ Tax Analysts (October 2012). "2012 TNT 209-51 LAW FIRM ANNOUNCES $ 38 MILLION REWARD TO TAX WHISTLEBLOWER. (Section 7623 -- Expenses of Detecting Frauds) (Release Date: OCTOBER 26, 2012) (Doc 2012-22264)". Tax Notes Today. 2012 TNT 209-51 (2012 TNT 209-51).
- ^ 2012 TNT 194-22 LAW FIRM ANNOUNCES $ 2 MILLION REWARD TO TAX WHISTLEBLOWER. (Section 7623 -- Expenses of Detecting Frauds) (Release Date: OCTOBER 04, 2012)
- ^ Temple-, Patrick (October 4, 2012). "Tax whistleblower gets $2 million IRS award: lawyer". Reuters.
- ^ Mandell, Mordy (June 20, 2012). "TAX HUMOR: IRS WHISTLEBLOWER RAP". Tax Notes Today - 2012 TNT 129-4.
{{cite news}}:|access-date=requires|url=(help) - ^ a b Shulman, Douglas. "IRS RESPONDS TO GRASSLEY'S WHISTLEBLOWER PROGRAM CONCERNS - 2012 TNT 147-29 - Letter from Douglas Shulman to Charles E. Grassley dated July 16, 2012". Tax Analysts Tax Notes Today.
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