«

»

Feb 20

Print this Post

IRS Whistleblower Program Grows

The IRS has had a whistleblower program for decades, but it was not widely used and not much was paid to whistleblowers. In February 2013, the IRS issued its annual FY 2012 report to Congress regarding use of Section 7623. The report shows substantial increase in the information reported by whistleblowers and the IRS consideration of such information.

The IRS report summarizes their current program as follows:

“The Tax Relief and Health Care Act of 2006 (section 406) (PL 109-432) created section 7623(b) of the Code. This section set a new framework for the consideration of whistleblower submissions and established the Whistleblower Office within the IRS to administer that framework. … A whistleblower must meet several conditions to qualify for the section 7623(b) award program. To qualify for a whistleblower award, the information must:

• Relate to a tax noncompliance matter in which the tax, penalties, interest, additions to tax, and additional amounts in dispute exceed $2,000,000; and

• For individual taxpayers only, relate to a taxpayer whose gross income exceeds $200,000 for at least one of the tax years in question.

If the information meets the above conditions and substantially contributes to a decision to take administrative or judicial action that results in the collection of tax, penalties, interest, additions to tax, or additional amounts, the IRS will pay an award of at least 15 percent, but not more than 30 percent, of the collected proceeds.”

This article provides additional information regarding the current program.

 

It takes quite a while to actually get a whistleblower bounty. The IRS explained this as follows:

“The number of payments made under the section 7623(b) program is not projected to grow dramatically in FY 2013. As discussed, it typically takes a number of years to analyze, investigate and/or audit, and collect proceeds. At each stage in the tax administration process, taxpayers have rights to challenge IRS findings, including administrative and judicial appeals. The incentive for taxpayers to exercise those rights increases as the amounts in dispute gets larger, which can mean a longer timeline for whistleblower submissions alleging larger dollar noncompliance.”

Once you do collect a bounty, the award will be ordinary income, as is explained here.

The IRS report contains the following excellent table that summarizes historical activity under the program:

 Amounts Collected and Awards Paid under 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 AwardsPaid

$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%

 

 

About the author

David Nolte

I am a founding principal of Fulcrum Inquiry, an accounting and economic consulting firm that performs damage analysis for commercial litigation, forensic accountings, financial investigations, and business valuations. I am a Certified Public Accountant (CPA) and an Accredited Senior Appraiser (ASA), as well as having other professional credentials. I regularly serve as an expert witness involving damages measurement. My litigation-oriented resume is on Fulcrum's website.

Permanent link to this article: http://betweenthenumbers.net/2013/02/irs-whistleblower-program-grows/

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

*