Large IRS Whistleblower Payoff Encourages Others

The Internal Revenue Service paid a $1.1 million reward to an anonymous whistleblower for information that exposed a tax fraud by Enron, Bankers Trust and others before the company collapsed.  The whistleblower, a Wall Street banker who has chosen to remain anonymous to protect his job and career, received the maximum reward of 15 percent.  Information regarding the payout was provided by the whistleblower’s attorney. 

The tax fraud allowed Enron to evade taxes on more than $600 million of taxable income, resulting in more than $200 million of federal tax savings. The IRS was able to recover only a percentage of taxes and penalties owed due to Enron’s bankruptcy.

This payout was made under the previous IRS whistleblower program.  Since this claim was filed, Congress and the IRS enhanced the program to allow for even larger payoffs.  The new program under 26 U.S.C. §7623 is explained in this article.  Under the new program, whistleblowers receive 15 to 30 percent of the amount the IRS recovers if the tax fraud or tax underpayments exceed $2 million (including penalties and interest).

Whether under the old or new program, this is one of the few substantial whistleblower rewards the new IRS Whistleblower Office has made.  The announcement of this award will likely encourage use of this program.

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