Whistleblowers Win Battle with IRS and Open Door for Future Cases
Two whistleblowers went up against the IRS recently for what felt was their share of an award for the information they provided that led to a massive $54.131 million judgment against a major Swiss bank. The argument from the IRS and the Department of Justice was that whistleblower laws don’t apply to criminal tax matters that result in payments consisting of civil forfeitures and fines.
Whistleblower Case History
In the initial matter, the two whistleblowers were awarded $4,474,000 based on the government’s recovery of $20 million in restitution that was paid directly to the IRS by the Swiss Bank for back-owed taxes. The IRS refused to pay any settlement to the whistleblowers based on the other $54.131 million that was collected from the bank. The tax court awarded the whistleblowers another $12.9 million based on this additional amount, but the IRS and DOJ objected.
The IRS and DOJ responded by filing an appeal, which was scheduled for oral arguments before the U.S. Court of Appeals for the District of Columbia Circuit in early April, 2018. The DOJ dismissed their appeal, which means the original award from the tax court stands. This is a big win for whistleblowers and leaves more funds available for payments in future matters.
This case was being closely monitored by advocates and industry experts who noted that the most important tax evasion cases are criminal in nature. To exclude these from the whistleblower laws would result in fewer cases and certainly less enforcement.
IRS Whistleblower Law
In general, IRS law allows for those whistleblowers who provide valuable tips to receive as high as 30% of monies collected as a direct result. The problem has been how to adequately define “collected proceeds.”
For the purpose of calculating reward payments, the IRS presented an argument that because whistleblower laws only pertain to tax matters, “collected proceeds” would only apply to taxes the IRS wouldn’t have collected without the assistance of the whistleblowers. In this particular case, that was $20 million. The IRS argued that the remaining $54 million was not part of the pool of funds that should be calculated with the “collected proceeds.” Obviously, the whistleblowers’ attorneys argued that the full $74 million should be the number used in calculation.
Before this case, whistleblowers were very unclear about the potential amount they might receive in a whistleblower matter. Awards were typically much lower if a case was handled as a criminal matter rather than a tax code issue.
When to Retain a Whistleblower Attorney
Whistleblower cases are very complex and require a very experienced attorney who is well-versed in the entire process. It’s important to remember that the IRS receives thousands of claims each year and they do not necessarily pursue each and every one. You need to provide credible and solid information, not what appears to be speculation or an “educated guess.” Claims that are rejected by the IRS are typically rejected because they didn’t provide enough information.
It’s important to retain a Florida IRS whistleblower attorney right from the start to ensure all your rights are protected under the various whistleblower laws and increase your chances of the IRS pursuing the case. The attorneys at McCabe Rabin have years of experience dealing with all types of whistleblower cases. Contact our office at 877.915.4040 to schedule a consultation and let us evaluate your potential claim.