Disclosures of Return Information in the IRS Whistleblower Program

On February 2, 2010, Deborah A. Butler, Associate Chief Counsel, provided legal advice in PMTA 2011-31, advising the employees of the IRS Whistleblower Office that they are authorized to disclose [taxpayer] return information in making tax reward payment determinations pursuant to Section 7623 or providing status updates to IRS whistleblowers regarding pending, unprocessed, or dismissed claims under Section 7623.

 However, the office stressed, the specific taxpayer return information that may be disclosed to an IRS whistleblower in a particular instance will depend on the facts and circumstances of the matter.  In the legal opinion, Ms. Butler stated,

"Neither section 7623 nor any other Code section specifically authorizes the disclosure of taxpayer return information in the course of the whistleblower award review and determination process.  Nonetheless…Congress presumably did not intend to create an irreconcilable conflict between the IRS Whistleblower Office’s non-disclosure obligations and its obligation to convey appealable determinations to whistleblowers."

The legal opinion from the IRS Office of Chief Counsel concluded that IRC § 6103(h)(4), which authorizes disclosures of such information in judicial and administrative proceedings, authorizes the IRS Whistleblower Office disclosures, as the whistleblower award review and determination process would be considered an administrative proceeding.

PMTA 2011-31 was dated Feb. 1, 2010.

Despite the above legal opinion from the Office of Chief Counsel, we note that in the nearly two years that has passed since the advice was given; the IRS Whistleblower Office is reluctant to provide status updates as to the open whistleblower cases.  It is important that the whistleblower engage a knowledgeable and experienced tax whistleblower attorney to assist them.

The IRS wants IRS whistleblower lawyers and their clients to assist in IRS in the enforcement of the law.

IRS whistleblower lawyers have brought a large number of previously unrecognized tax issues to the attention of the IRS.  A prior report by the Treasury Inspector General of Tax Administration (TIGTA) determined that the cost of assessing and collecting tax is approximately 40% less that what the cost would be without the inside information from IRS whistleblowers.  A number of good tax issues have been brought to the IRS attention by IRS whistleblower lawyers and their clients and the success of the program is up to the IRS.  Some of the more recent large tax issues are -

1.  Offshore Accounts (IRS has instituted several “amnesty” type programs and is expected to reach $5 billion in collection since this issue was brought to its attention of the IRS by a Whistleblower).

2.  Employee v. Independent Contractors - many businesses aggressively classify their employees as independent contractors to avoid billions of dollars of payroll taxes.  A significant number of IRS Whistleblower lawyers and their clients have brought these matters to the attention of the IRS and in response the IRS decided again the best way to handle this tax issue is again to offer an amnesty program.

3  Identity theft.  This area of the law has gotten lots of attention from the news media for the underlying theft issue, but there are hundreds of millions of dollars of tax that are not being paid by the thieves on the income and the IRS is looking for whistleblowers to bring to its attention large identity theft matters.

4.  Gift Tax.  Most of the population is aware that the very wealthy are transferring great wealth to their children.  This is often done through legitimate tax planning.  However, this can be done through a common means of simply transferring real estate to family members at no cost.  In fact valuable real estate can be transferred at no cost (i.e. a gift) and there are no reporting requirements.  That is, no 1099s, or any other information type returns, are issued to report the land transfers between family members.  In fact, a number of whistleblowers have simply scoured the recorder of deeds, either locally or on the internet, finding land transfers of wealthy individuals to family members that are actually identified as “gift deeds” or simply reflect that the land is being transferred for $1 or the love and affection of the grantee (i.e. the children). 

The IRS recognize that this last issue exists due to the information brought to its attention by IRS Whistleblower lawyers and their clients and have determined that it will put its resources into this issue.

As part of a new initiative in finding gift tax evaders, the Internal Revenue Service asked a federal court for permission to order a California state tax agency to hand over its computer database of everyone who transferred real estate to relatives for little or no consideration.

In response, the federal district court judge gave the IRS permission to serve a “John Doe” summons on the California State Board of Equalization demanding the names of residents who transferred property to their children or grandchildren for little or no money. The IRS wants those names as part of a crackdown on what it believes is the widespread failure to file required gift tax returns when real property is passed between family members.

The IRS has already received information about intra-family property transfers from county or state officials in Connecticut, Florida, Hawaii, Nebraska, New Hampshire, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Tennessee, Texas, Virginia, Washington state and Wisconsin.

In an affidavit filed in the California case in October, Josephine Bonaffini, the Federal/State Coordinator for the IRS’ Estate and Gift Tax Program, said the agency has so far examined 658 taxpayers identified as transferring property to relatives and concluded that 238 of them should have, but didn’t, file Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return. Twenty of those delinquent filers have already been assessed extra tax because they had exceeded the amount each person is allowed to transfer gift tax free, she said. Through 2010, that lifetime gift tax exemption was just $1 million. For 2011 and 2012, it has been raised to $5 million. Anyone can give anyone else property or cash worth up to $13,000 a year without that gift counting against the lifetime exemption, but gifts above that $13,000 “annual exclusion” amount must be reported on a Form 709 so the IRS can keep track of how much of his or her lifetime exemption each taxpayer has used up.

With a normal summons (i.e. Form 2039), the IRS seeks information about a specific taxpayer whose identity it knows. A John Doe summons, by contrast, allows the IRS to get the names of all taxpayers who are members of a certain group it has reason to suspect might have broken the law. In the past the IRS has used John Doe summons to seek lists of American taxpayers who have used aggressive tax shelters and of those who have unreported offshore accounts at Swiss Bank UBS and at HSBC’s bank in India.

Again, the IRS whistleblower program is and will continue to be a great success as it brings facts and issues to the IRS

The Tax Whistleblower Law Firm (1-877-404-1040) consisting of former IRS lawyers assist whistleblowers in filing acceptable claims into the IRS Tax whistleblower program by providing well developed facts, issue and law, evaluating the continued confidentiality of the client, as well appealing administratively and judicially the determination by the IRS.

IRS Tax Whistleblower Service at no Cost

In an effort to promote the IRS Whistleblower program, the Tax Whistleblower Law Firm is willing review and suggest changes and modifications to IRS Whistleblower Claims at no charge to those individuals that desire to file their own IRS Whistleblower Claims.  We are willing to do this at no cost to the Whistleblower because we believe in the IRS Whistleblower program and want to see it successful in the years ahead.  We, as taxpayers, are all in this together, and certain taxpayers should not be circumventing the law simply because they can, or have been in the past.  The only condition is that we have the opportunity to provide our review prior to submission of the IRS Whistleblower Claim to the IRS.

This blog will provide information to those individuals that would like to file an IRS Whistleblower claim without the assistance of an IRS Whistleblower attorney/lawyer.

Although it does not appear to be a complex matter, the IRS simply requires that such an individual file a one page Form 211, Application for Award for Original Claim….nothing more.  There are 18 relatively easy questions, which include 9 questions (name address, etc.) just about the whistleblower.

As the IRS states in the instructions to the filing of the IRS whistleblower claim, as well in Notice 2008-04, the information provided should be “specific and credible.”  To the extent the IRS whistleblower has documentation, we certainly recommend that the IRS whistleblower claim contain not only specific and credible information, but be accompanied by supporting (i.e. relevant) documentation.  Remember, with specificity comes credibility.  All the information should be presented clearly and concisely.  Take into consideration all the positive factors the IRS will consider when determining the maximum IRS tax reward that you may be entitled and try to meet those positive factors.  See our prior blog on the IRS computation of a tax reward

Our office also recommends that the 211 claim, or 211 claim package, contain the same type of information that an IRS administrative file might contain, should the IRS have completed its examination and sent the case forward for trial.  As former IRS attorneys we strive to provide all the necessary information and documentation that the IRS needs in the processing of the claim and the completion of the examination, including a legal analysis of the substantive tax issue.  We will make specific suggestions as we review the files on a case by case basis for those whistleblowers filing their own claim.

The above is what is recommended for the submission of an IRS whistleblower claim.  An experienced and knowledgeable tax whistleblower attorney will only be able to assist if they are tax attorneys familiar with the substantive tax issue and experienced with the IRS whistleblower procedures.  Such an attorney will provide value assuring that the 211 Claim is clear and concise and will be accepted into the program.  In addition, the IRS whistleblower attorney work to maximize the reward, shorten the examination time (hence the time for pay off or the reward), and protect the identity of the whistleblower, including providing a guarantee.

Other reasons to consider an experienced tax whistleblower attorney include the continuance guidance through what is likely a 5 to 7 year process.  The attorney will supplement the claim over time with new and material information should such information exist.  The attorney will accompany the whistleblower to any meetings for which the IRS desires to meet with the whistleblower and will prepare the whistleblower for such meeting. Lastly, the experienced tax whistleblower attorney will handle the administrative and judicial appeal at no additional cost.

The Tax Whistleblower Law Firm has submitted hundreds of tax whistleblower claims over the years for billions of dollars and, to date, has had every case accepted into the IRS Whistleblower Program.  Therefore, again, if you are filing an IRS whistleblower claim and would like, at no charge or commitment, comments and recommendation by the former IRS attorneys of the Tax Whistleblower Law Firm with respect to your IRS whistleblower claim, call 1-877-404-1040 or complete an email request on our Contact page.