Don’t File Your Tax Whistleblower Appeal in the Court of Federal Claims
Even though the IRS advised tax whistleblowers up until January 2009 that they could file appeals of claim denials with the Court of Federal Claims, a whistleblower recently found out the hard way that the COFC would not hear the case. Despite sending the whistleblower a Letter 1010 telling him that COFC would hear some whistleblower appeals, the IRS moved that the court dismiss the case. COFC agreed with the IRS.
Claimant Robert Colman notified the IRS that Accountant Steven Krell embezzled funds from and filed false tax returns for Colman’s mother. In 2003, the IRS rejected Colman’s claim and told him he could appeal to the Court of Federal Claims. Colman learned Krell pled guilty to the filing of false tax returns in 2009. Colman filed in the Court of Federal Claims in April 2010 requesting 15 percent of whatever the Service recovered from Krell as a result of the tax action.
The IRS countered by pointing out that Section 7623(a) is not a money mandating statute. Section 7623(a) does not mandate tax whistleblower awards; 7623(b) does. Section 7623(a) covers claims that were made prior to the 2006 statute change that allowed whistleblowers to get awards if their claims met certain criteria. Today, it also includes those claims for awards that fail to meet statutory and agency threshold considerations.
The IRS also stated that COFC could not properly assert jurisdiction over the matter, despite its previous letter to Colman stating that the Court of Federal Claims was the appropriate forum for appeals. The Service stated that in 2003 the Service believed the COFC was the correct court for limited types of whistleblower appeals, but it learned subsequently that this was not true and Letter 1010 confused people with its COFC reference. The Service stopped using Letter 1010 in January 2009. The Court of Federal Claims expressed dismay that Colman wasted time and money by responding in conformity with the letter when he decided to appeal.
Despite its criticism of Letter 1010, the Court of Federal Claims sided with the IRS. Noting that parties cannot confer jurisdiction on a federal court simply by agreeing that a particular court should hear a particular matter, the court dismissed Colman’s case.
Tags: tax claims, Tax Fraud, whistleblower, whistleblower appeals
This entry was posted on Thursday, February 3rd, 2011 at 12:27 pm and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.
