A guest post from Dean Zerbe, senior policy analyst for the National Whistleblower Center and former tax counsel for the Senate Finance Committee.
Many people considering blowing the whistle on tax evasion ask themselves the most basic question: Do I have a case that will interest the Internal Revenue Service (IRS)?
I have represented whistleblowers who have received over $300 million dollars in award payments from the IRS and during that time have found that there are a few key tests that may increase the possibility the IRS will take action on a whistleblower submission.
Federal Tax v. State Tax
The IRS whistleblower award program is focused on federal tax. If your case involves state taxes– then the answer is no. However, some states do have a whistleblower program that you may wish to explore filing with the appropriate state. Also, if the federal tax at issue is payroll tax, be cautious. These are highly fact intensive cases – and commonly the IRS will tell the taxpayer to simply “get right” going forward – with no back taxes owed (and therefore no award).
Know v. Speculation
The IRS whistleblower office has continually beaten the drums that they are looking for submissions from whistleblowers who have good, informed knowledge about tax evasion – as opposed to speculation. Speculation for the IRS means that the whistleblower doesn’t have first-hand knowledge, but may be familiar with the industry and believes or expects that there is evasion of tax. Particularly problematic submissions are those cases where the whistleblower cannot even name the specific taxpayer evading tax. While the IRS is open to a submission where the whistleblower doesn’t know every step of the transaction – the more the whistleblower can color it all in – the better.