U.S. Tax Court Gives the IRS Whistleblower Program a Boost

On December 28, 2011, the IRS Whistleblower Program received a big boost when the U.S. Tax Court proposed new Tax Court Rule 345 to protect the identity of the Tax Whistleblower.  Those seeking a tax award/reward for reporting tax fraud are assured that their identity is protected by the U.S. Tax Court in the appeal of their IRS Whistleblower claim…”if appropriate.”

The IRS policy is to protect the identity of a IRS Whistleblower that provides information as part of the IRS Whistleblower Program.  However, there does exist the unusual situation in which an IRS Whistleblower may be called to testify in a court proceeding.  However, this situation has not occurred under the new IRS Whistleblower Program since it was initiated on December 20, 2006.  In addition, it is highly unlikely that this situation will happen in the future with the proper representation.

IRS Whistleblower Attorneys/Lawyers should be tax attorneys/lawyers first and whistleblower attorneys/lawyers second.  In every IRS Whistleblower matter the tax whistleblower attorney should evaluate the claim (i.e. 211 Form), as well as the client and make a determination if the IRS whistleblower is a likely candidate for being a witness should the tax claim ultimately result in litigation by the IRS.  The attorneys at the Tax Whistleblower Law Firm use their experience, as former IRS attorneys, to assist them in making this decision.  Since the Tax Whistleblower Law Firm prepares the 211 claim package for submissions into the IRS whistleblower program in a manner similar to what they would expect the IRS to have prepared if they were in a position to litigate the case as if they were still IRS attorneys, they are also in a position to make a judgment if the client/whistleblower is a likely witness should a case end up in litigation.  No tax whistleblower claim should ever be submitted to the IRS in which the whistleblower is not advised as to the likelihood of them having to testify in the matter.

Confidentiality is what makes the IRS Whistleblower Program successful.  Congress, pursuant to I.R.C. § 7623, gave the IRS Whistleblower the right to appeal the IRS determination of award/reward to the US Tax Court.  Until recently, the tax court had not ruled as to whether the tax whistleblower could proceed anonymously in the filing of an appeal.  On December 8, 2011, in the case of in Whistleblower 14106-10 v. Commissioner, 137 T.C No. 15 (2011), the U.S. Tax Court ruled that the openness of a public record must be weighed with the protection and safety of the whistleblower in these matters.  The Tax Court has now proposed a new Rule (i.e. Tax Court Rule 345) to protect the identity of the IRS Whistleblower

Proposed Rule 345. PRIVACY PROTECTIONS FOR FILINGS IN WHISTLEBLOWER ACTONS(a) Anonymous Petitioner:  A petitioner in a whistleblower action may move the Court for permission to proceed anonymously, if appropriate. Unless otherwise permitted by the Court, a petitioner seeking to proceed anonymously pursuant to this Rule shall file with the petition a motion, with or without supporting affidavits or declarations, setting forth a sufficient, fact specific basis for anonymity. The petition and all other filings shall be temporarily sealed pending a ruling by the Court on the motion to proceed anonymously.

Through experience we have worked with IRS whistleblowers that have indicated that if their identity is not protected, they could lose their life, family, careers, employment, licenses (attorneys/CPAs), etc.  Therefore, this proposed rule by the U.S. Tax Court is an important step for the success of the program.  We strongly recommend that a whistleblower work with qualified “tax” attorneys to assist them with the IRS Tax Whistleblower Program as well as an appeal, so as to protect their identity.  There are several tax whistleblower law firms, by guaranteeing the whistleblower’s confidentiality, are willing to forfeit their fees should the law firm or the IRS intentionally or unintentionally disclose their identity.  There are even fewer law firms that are willing to handle the appeal to the U.S. Tax Court as part of the representation.

Should you have any questions to the IRS Whistleblower Program, please Contact our office.