Honest, hard-working taxpayers should be joyous with the news that the Director of the IRS whistleblower office — Lee Martin — just issued its FY 2018 annual report and announced that the IRS collected $1.441 billion in taxes, penalties and interest from big-time tax cheats in FY 2018 thanks to information provided by whistleblowers.
Similarly, whistleblowers should be dancing in the street – with Director Martin announcing $312 million in awards made to whistleblowers in FY 2018 – up from $33.9 million in awards made in FY 2017.
Tax whistleblowers received from the IRS an average award of 21.7% based off of $1.441 billion in taxes, penalties and interest that were collected in FY 2018 – thanks to the information provided to the IRS by whistleblowers. These numbers are game changers when it comes to going after tax fraud – and suggest that finally, finally, the whistleblower program is becoming ingrained into the work of the IRS and that more and more of the IRS embraces the great value of the information provided by whistleblowers. The IRS made 31 awards under the mandatory award program (7623(b))(major awards) and 186 smaller awards under 7623(a).
The news that whistleblowers are being awarded should give serious pause to those who have undeclared accounts; undeclared income; or have signed on to corporate tax shelters. Now is the time to get right with the taxman.
For all the talk that fills Washington about making sure people pay their fair share, this little program of awarding whistleblowers — championed by Senator Grassley (R-IA) — has punched far above its weight in terms of successfully going after big-time tax cheats. Any country (or state) that wants to get serious about tax evasion should take note.
Credit to Director Martin and his team at the whistleblower office in making much of this good news happen. With my own whistleblower clients, I saw first-hand the hard effort they made to cut through red tape and find solutions to help whistleblowers get awards. Director Martin said in an interview earlier this year at NYU that his focus this year was to “’B’ focused” – translated – to have his office focused on getting out the mandatory awards (the big awards) under 7623(b) of the internal revenue code. Director Martin and his team delivered. And also, of course, a big thanks to all the IRS examiners, auditors and especially criminal investigators who worked with the whistleblowers and the information they provided.
It should be noted that along with the good work of the IRS whistleblower office and the IRS agents and investigators — the marked increase in dollars collected and awards provided under the whistleblower program is also due, in part, to an important victory in a tax court case on the question of the definition of “collected proceeds.” The decision in this case — for which I was lead counsel as well as the good work of my cocounsels Steve Kohn at KKC and Bob Amsel (and special thanks to the amicus brief filed by Bryan Skarlatos and his folks at Kostelanetz and Fink) — clarified that collected proceeds for purposes of a whistleblower award includes criminal and civil penalties, forfeitures, etc. This clarification gives a more accurate reflection of the value to the public of the information that whistleblowers provide. Congress in an important amendment confirmed the Tax Court’s ruling in this case and clarified that collected proceeds also encompassed FBAR penalties as well.
Even better — I expect this good news of more dollars to the treasury (and less burden for honest taxpayers) and higher awards for tax whistleblowers to keep rolling on based on what I’m seeing first-hand in my practice and from talking to other lawyers representing tax whistleblowers – and underscored by the new practice of the whistleblower office issuing preliminary award recommendation letters (PARLs) prior to the refund statute expiration date (a big help). The tax whistleblowers represented by my law firm Zerbe, Miller, Fingeret, Frank & Jadav, (ZMF) – as well as my superb co-counsel on these cases Steve Kohn at Kohn, Kohn and Colapinto (KKC) law firm– have already received award letters of over $84 million for this fiscal year to date — with our whistleblower clients previously receiving over $158 million in awards in FY 2018.
I’ve written previously for Forbes on what makes for a good whistleblower submission to the IRS and today’s annual report from the IRS underscores that the IRS is particularly interested in information about unreported accounts; unreported income and tax shelters – highlighted by the Table 2(A) in the report. Today’s report notes a significant percentage of the whistleblower submissions that pass through the triage and review and get sent to the operating division are in criminal investigation and large business and international. Again though – the IRS wants hard, cold facts – not speculation or theories. Ideally, whistleblowers are knowledgeable, informed insiders with good documentation about recent/current tax evasion involving serious dollars. The good news from today’s report is that it is clear that when it comes to whistleblowers with good information — the IRS is more than willing to provide real rewards.