The Tax Whistleblower Reward Program Turns Two

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Two years after the creation of the Tax Whistleblower Reward Program, the IRS has announced that it has received almost 1000 tips from informants desiring to expose the under-reporting of tax. The plea of Congress, to the American people to expose taxpayers who underreport and fail to pay tax or otherwise commit tax fraud, is more successful than expected.

In a recent speach before the American Bar Association, the IRS announced that the Tax Whistleblower Reward Program is more successful than anticipated. A large spike in submitted claims in 2008 shows that the new whistleblower law is "working as it was intended" since it was revised two years ago, said IRS WhistleBlower Office Director Stephen Whitlock. Part of the law's initial success can be seen in the public's awareness of it, Whitlock told the American Bar Association Section of Taxation at the fall meeting in San Francisco on September 12.

In December 2006, Congress turned to the American people to expose taxpayers (i.e., individuals, businesses, estates, and trusts) who underreport and fail to pay tax. As part of the Tax Whistleblower Reward Program, the United States announced that it will reward any person who provides information that leads to the identification of $2 million or more of unreported tax, including interest and penalties. This legislation guaranteed that any person who provides useful information will receive a minimum of 15%, and a maximum of 30%, of the amount that the IRS actually collects.

The IRS Whistleblower Office has acknowledged that the issue of confidentiality of informants is a major issue of concern that still needs to be addressed. In December, the U.S. Tax Court modified its Rule 340 to allow informants to challenge award determinations of the IRS, without the disclosure of the identity of the informant. Under the new rule, an informants name and other identifying information will not become a matter of public record.

A group of former IRS attorneys have formed a specialized law firm that represent tax informant s under the Tax Whistleblower Reward Program. "The goal of all tax whistleblower attorneys should be to protect their client's confidentiality," says Tom Pliske, former IRS attorney. "At our law firm, not only do we take steps to protect an informant's identity, but we guarantee that neither our personnel nor the IRS and its personnel will disclose an informant's identity." However, potential tax informants need to make an informed decision, before submitting a claim, regarding whether there is a desire to proceed should an informant's testimony be necessary to secure a reward. Once the case is accepted by the IRS, the IRS could issue a subpoena requiring an informant's testimony in a tax court matter. Whistleblowers must be aware of and consider this contingency prior to submission of a case to the IRS under the Tax Whistleblower Reward Program. The American people are encouraged to report tax fraud.

In the United States of America, a small percentage of taxpayers (i.e., individuals, businesses, trusts, and estates) underreport and fail to pay up to $400 billion in taxes every year, according to a study released by the IRS. This small group is comprised of an elitist group of wealthy Americans and businesses who neglect or refuse to pay their fair share of tax and who undermine the stability of the country to satisfy their own personal greed. This missing revenue causes unnecessary increases in annual deficits, national debt, and national interest payments. In the end, this missing revenue must be made up by honest Americans through higher taxes.

Information regarding a wide range of tax issues, both criminal and non-criminal in nature, may lead to a reward under the Tax Whistleblower Reward Program. A common misperception is that, in order to be entitled to a reward under this Program, you must possess information regarding tax fraud or criminal tax evasion. However, this Program is not limited to issues rising to the level of tax fraud or criminal tax evasion.

Rob Stientjes
S & P Law Firm, LLC


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Robert Stientjes
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