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Want To Be An IRS Whistleblower?

As a CPA in Miami I know it is no secret that the IRS needs money.  It’s also no secret that the IRS is paying for information.  The IRS Whistleblower Office has released its fiscal year 2010 annual report to Congress, and it’s an eye opener.  All CPA in Miami want to know how big is this topic?

The entire Swiss banking industry was brought to its knees because of a IRS Whistleblower.  That individual still expects to receive a nice chunk of change for the tax dollars his actions are bringing into Treasury Department coffers.  Tax Informants Are On The Loose according to CPA in Miami, Viera.  Looking beyond the foreign banking controversy, there will be many big tax collections traceable to the actions of IRS Whistleblower.

Many CPA in Miami may think of this as a new development, but IRS Whistleblower incentives started in 1867!  Big changes in 2006 raised the stakes materially, adding new Section 7623(b).  Under it, awards to IRS Whistleblower are no longer discretionary.  Now, the whistleblower “shall” receive 15 to 30 percent of the collected proceeds.

That’s shall, not may.  Procedural safeguards were added too.  The 2006 law added IRS Whistleblower appeal rights.  The IRS then created a IRS Whistleblower Office reporting to the IRS Commissioner.  See IRS Whistleblower/Informant Award.  Although there was a long dry spell, the first award was recently paid.  That was good news for many tax whistleblowers becoming tired of IRS delays.

According to our CPA in Miami research fiscal year 2010 annual report to Congress, during fiscal year 2010, the IRS received 431 IRS Whistleblower submissions relating to 5,429 taxpayers that appeared to meet the $2 million of tax, penalties, interest, and additions to tax threshold in Section 7623(b).  Here is a tabulation:

One source of frustration among tax IRS Whistleblower is that they often turn over what they think is key information to the IRS about a tax cheat, only to find that the IRS can’t seem to turn it into cash.  Only actual cash in the IRS’s hands will produce an award to the IRS Whistleblower.  In fact, in the past, the IRS monitored tax cases to collect proceeds before processing the award claim.

Now the IRS wants to wait to pay claims until the period for filing an appeal has lapsed.  The general rule is that a taxpayer may file a claim for refund within two years of the last payment, unless the taxpayer has waived that right.  Beginning in July 2009, the IRS started monitoring cases for collection and the lapse of the period for filing a claim for refund.  As a result, the IRS did not pay some claims it otherwise would have paid in fiscal year 2009 until fiscal year 2010 or 2011.

As a CPA in Miami I applaud the IRS and IRS Whistleblower going after individuals and companies evading taxes. However, the IRS should play fair and pay out, regardless of timelines. Thats just going to discourage whistleblowers from making the effort.

About the Author

Gustavo VieraGustavo A Viera is the managing partner of Gustavo A Viera, PA. His experience spans more than 25 years. He started his career in public accounting at PriceWaterHouseCoopers where reached the level senior audit manager. His Fortune 500 experience includes positions as CFO - Latin America Region for both Hewlett Packard and Telefonica of Spain. Gustavo also writes a blog twice a week that addresses trending accounting and tax issues. He is an SBA Advisor and teaches workshops for aspiring entrepreneurs. His office is located at One Alhambra Plaza Floor PH Coral Gables FL 33134, and is admitted to practice in the State of Florida as a licensed Certified Public Accountant. Gus welcomes questions and he can be reached at 786-250-4450.View all posts by Gustavo Viera →