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Posts Tagged ‘IRS whistleblower program’

IRS Whistleblower Program: Under Attack. Again.

Friday, April 12th, 2013

**UPDATE**

On March 13, 2013, the United States Tax Court issued an order calling for an evidentiary hearing to determine whether Joseph Insigna ever received a determination from the IRS.  Order, Joseph Insigna v. Commissioner of Internal Revenue Service, No. 4609-12W (March 13, 2013).  In his petition to the Court, Insigna argues that, although he has not received a final determination letter from the IRS, his whistleblower claims “have, as a practical matter, been denied, and that he has therefore received a de facto rejection.”

In response, the IRS argues that Tax Court lacks jurisdiction to hear the matter because it has not, in fact, issued a determination on Insigna’s claim.

While both sides seem keen on arguing over whether Tax Court has jurisdiction over a claim in a situation when the IRS unreasonably delays in failing to issue a determination letter, the Order makes clear that the Court does not intend to reach that question unless it must.  Instead, the Court will first focus on whether Insigna did, in fact, receive a determination — even a de facto determination .

Pursuant to the whistleblower statute, Tax Court has jurisdiction only if there has been “any determination regarding an award.”  Id.  To that end, the Court noted that the statute “does not explicitly require a ‘notice’ of a determination, nor a written determination, nor even any communication of a determination.”

The purpose, then, of the evidentiary hearing is to determine whether a de facto determination has, in fact, been made.  To reach that conclusion, the Court will seek to determine “whether the IRS has completed its consideration of petitioner’s claim; what, if anything, the IRS is still doing with regard to petitioner’s claim; and whether the IRS expects to do anything in the future with regard to petitioner’s claim.”  Id.  Notably, the Court states that “[i]f there has been a cessation of administrative action, then a reviewable determination may have been effectively made thereby.” Id.

 

 

A former bank executive recently filed suit against the Internal Revenue Service claiming that the IRS owes him a reward for blowing the whistle.

Joseph A. Insinga filed a claim for an award with the IRS Whistleblower Office in 2007, one year after Congress passed a law establishing the Whistleblower Office.  Under the Tax Relief and Health Care Act of 2006, tax whistleblowers may receive an award ranging from 15% to 30% of the total taxes, penalties, and interest collected by the IRS, with the actual percentage awarded based on an informant’s contribution to the case.

Insinga claims that the IRS collected proceeds from the allegedly fraudulent taxpayers based on information that he provided, but he has yet to receive a response from the IRS regarding an award.  As a result, Insinga filed a claim in the United States Tax Court, claiming the IRS owes him a portion of the proceeds it collected based on his information.

According to his petition, for at least two years, the IRS led him to believe that an award was forthcoming yet, following purported payments by the targeted taxpayers in November 2011, the IRS changed its tune, informing Insigna that his claims “were on life support.”  Moreover, the IRS claimed that there were “other sources” of the information Insigna provided nearly four years earlier. The IRS subsequently informed Insigna that a final decision would be issued soon.  According to Insigna, that statement was made in November 2011.  Following nearly four more months of silence, Insigna filed his petition in or around February 2012.

The news of Insinga’s claim does not come at an opportune time for the IRS, which earlier last week was the subject of a scathing article on Forbes.com, critical of its failure to reward whistleblowers for valuable information.  According to the author, Erika Kelton, an attorney at Phillips & Cohen who represents whistleblowers before the IRS, the problem with the IRS whistleblower program is not the “quality of the whistleblower information that the IRS is receiving” but rather “the IRS itself and institutional resistance to whistleblowers within the IRS.”

In FY 2010 alone, the IRS collected $464.6 million from taxpayers under its whistleblower program, so it is clear that the information is out there.  The problem is that the IRS hands out too few awards, and takes too long to pay them.

It has recently been suggested that the IRS establish a website to monitor the status of its whistleblower claims.  Even if personal data was redacted in accordance with IRS regulations, the website would at least reassure whistleblowers that their claims are being processed.

Whistleblowers should be viewed not as a burden, but rather as a weapon in the fight against fraud.  After all, the False Claims Act recovered over $4 billion in federal funds in FY 2011.  Given that the annual gap between what is owed in taxes and what is paid is approximately $385 billion (and growing), the IRS would be well served to use the tools Congress provided when it established the whistleblower program and follow in the footsteps of the False Claims Act in an effort to eliminate tax fraud and the $385 billion gap.

If you have knowledge of Tax Fraud and would like to discuss the possibility of a whistleblower award under the IRS Whistleblower Program, please contact our whistleblower attorneys today. Kenney & McCafferty will consult with you about your case, without obligation. All communications with Kenney & McCafferty attorneys regarding your case are confidential and protected by attorney-client privilege.

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K&M Presents Testimony on Whistleblower Program

Wednesday, May 18th, 2011

The IRS Building in Washington, D.C.

Linda Stengle of Kenney & McCafferty, P.C. presented testimony before the IRS on May 11, 2011, on its proposed definition of “collected proceeds.” The definition, if approved, would form the basis of calculating whistleblower awards.

The IRS had four people on a panel to hear the comments. They were Tom Kane, Senior Legal Counsel; Stephen Whitlock, Director of the Whistleblower Office; Alexandra Minkovich, Attorney-Advisor; and Kirsten Witter, Chief of the Service’s Ethics and General Government Law Branch. The panel asked questions of a few presenters, including Stengle. Tom Kane stated that NOLs should be considered to be ordinary deductions and were not relevant to an award calculation. Kane also said there should be no 2 year waiting period imposed in cases involving a closing agreement and that further guidance would be issued with regard to whether whistleblowers can obtain a portion of criminal fines.

Stengle pointed out irregularities in the public comment process ordinarily required when the IRS changes a major regulation. Specifically, the IRS issued its Whistleblower Manual in June 2010 without public comment and narrowed the definition of “collected proceeds.” Senator Grassley, the author of the statute mandating IRS whistleblower awards, criticized the Manual and said that several sections worked to deter whistleblowers from reporting large scale tax underpayment. Stengle echoed Grassley’s request that the manual be held in abeyance while substantive sections undergo public comment.

Four other attorneys presented testimony on the topic. Among other comments, Richard Rubin observed that the proposed rule addressed the inclusion of specific categories of recovery into the definition, but no actual definition for “collected proceeds” exists anywhere in the regulations.

All those who presented stated that the proposed definition for collected proceeds needed to be broadened. The panel members gave no indication of when the IRS plans to publish the final version of the definition.

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Posted in Abusive Tax Shelters, Corporate Tax Fraud, Employment Tax Fraud, Estate Tax Fraud, IRS Whistleblower Office, Money Laundering Tax Fraud, Offshore Accouts Fraud, Tax Fraud, Uncategorized, Whistleblower Protection | Comments Off

Corporate Attorneys and Investigators Represent the Company – Not Whistleblowers

Wednesday, May 4th, 2011

Corporate investigators and attorneys will protect the company. It's their job.

A long time corporate investigator recently shared his concern that whistleblowers look to corporate investigators and attorneys for help and protection when they blow the whistle.  Nothing could be further from the truth.  “There’s nothing I can do,” said the investigator.  “I’ve seen it over and over again.  They are going to get their heads cut off.”

The investigator said he knew that whistleblowers, no matter the merit of their report, would be skillfully and systematically terminated with a substantial paper trail to support management’s actions.

“They look to me for help,” he said.  “I work for the company.  I tell them that, but they don’t seem to understand.”

Neither did CEO Ian Norris of Morgan Crucible Company.  Morgan Crucible came under government investigation for an international price fixing conspiracy.  CEO Norris began a campaign to obstruct a grand jury investigation, and he shared details of his campaign with Morgan Crucible’s attorney.  When the government learned of Norris’s obstruction, it charged Norris with corruptly persuading, and attempting and conspiring to corruptly persuade, others with intent to influence their testimony in grand jury proceedings.  Morgan Crucible waived its attorney client privilege and granted permission for corporate counsel to testify.  Norris fought the testimony, saying the corporate attorney also represented Norris in his individual capacity and was prohibited from testifying. 

The Third Circuit disagreed, but found that communications about scope of representation were ambiguous.  Ultimately, the court ruled that Morgan Crucible, alone, held the right to waive attorney client privilege, and the attorney testified.

The attorney testified that Norris, in front of counsel, disseminated a false cover story and scripts about the price fixing and encouraged everyone, including counsel, to relay the false information to investigators.  The attorney said he did not know the information was false.

Attorneys and investigators should provide employees with explicit explanations about their role in investigating allegations of fraud within a corporation.  They often do not, for a variety of reasons.  Bottom line – employees need to take steps to protect themselves when they report corporate misconduct internally. 

For a free consult about whether you have a potential government fraud claim, call K&M today.

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Posted in Corporate Tax Fraud, Employment Tax Fraud, False Claims Act, Money Laundering Tax Fraud, Offshore Accouts Fraud, retaliation, SEC Whistleblower Program, Tax Fraud, Uncategorized, Whistleblower Protection | Comments Off

IRS Goes Viral?

Thursday, April 14th, 2011

One of many IRS YouTube offerings.

Not exactly, but the IRS has introduced its own YouTube channel, along with an array of audio products to help taxpayers take advantage of tax benefits available in the American Recovery and Reinvestment Act. People can visit the site at www.youtube.com/irsvideos. The IRS YouTube channel caters to people of different backgrounds by offering videos in English, Spanish, and American Sign Language.

One video teaches viewers how to use the IRS Withholding Calculator. The IRS suggests that people who have more than one job or working spouses should especially check their withholding to ensure neither too much nor too little is being withheld. People can use the calculator to help determine if they should make adjustments. Another video of interest discusses the role of an interim appeals office and what taxpayers can expect from that office.

In another attempt to make the tax code more transparent to today’s filers, the IRS has also launched an ITunes podcast site featuring information about ARRA tax credits.

Unfortunately, the IRS tax whistleblower program has not been the subject of a YouTube video, at least not one produced by the IRS. However, interested tax fraud followers can go to YouTube and type in “irs whistleblower.” One of the results listed will be a video of an IRS Whistleblower Conference panel discussion starring K&M’s lead partner Brian Kenney.

Of course, if you would like to learn more about the IRS whistleblower program, there’s no need to look at YouTube at all. Call Kenney & McCafferty at 215-367-4333 for a free consult today.

 

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Posted in Abusive Tax Shelters, Corporate Tax Fraud, Employment Tax Fraud, Estate Tax Fraud, IRS Whistleblower Office, Money Laundering Tax Fraud, Offshore Accouts Fraud, Tax Fraud, Uncategorized | Comments Off

IRS To Hold Hearing on Definition of Collected Proceeds

Monday, April 4th, 2011

The IRS Should Target Large Corporations for Tax Fraud

The IRS has set May 11, 2011, as the hearing date for public comment on proposed regulations REG-131151-10 on the payment of rewards for whistleblowers. Chief among the areas of interest is the new definition of “collected proceeds.”

The proposed regulations do not make it clear whether corporations alleging a Net Operating Loss that is reduced by whistleblower information would result in an award for the whistleblower. Large corporations routinely rely on highly sophisticated tax experts to help them reduce their cash tax liability. The IRS’s proposed change in definition of “collected proceeds” appears to target individual taxpayers but fails to clearly identify large corporations who evade taxes. Tax underpayment by corporations, not individuals, should be the focus of the IRS. Corporations represent the greatest opportunity to capture much needed tax dollars for the US Treasury. Those blowing the whistle on large corporations should be incentivized to the same extent as those blowing the whistle on an individual taxpayer.

People who want to present oral comments at the hearing must submit a written outline of their comments to the IRS by April 19th. Each speaker will be allotted 10 minutes. The hearing will be held at the Internal Revenue Building at 1111 Constitution Avenue, NW, in Washington, D.C.

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Posted in Abusive Tax Shelters, Corporate Tax Fraud, IRS Whistleblower Office, Money Laundering Tax Fraud, Offshore Accouts Fraud, Tax Fraud, Uncategorized | Comments Off

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