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Regs outline IRS whistle-blowers’ rights and responsibilities

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in Office Management,Payroll Management,Small Business Tax

It’s not exactly WikiLeaks, but Payroll administrators who are distressed over other employees’ alleged violations of the tax code can work with the IRS’ Whistleblower Office to expose tax law violators. Final regulations set some of the ground rules for cooperating with the IRS in whistle-blower investigations. (T.D. 9516)

Sign here, and mum’s the word. The IRS’ Whistleblower Office is authorized to pay monetary awards in proportion to the value of the information provided. Awards could turn out to be substantial.

However, one major drawback to exposing tax law violations is that virtually everything that appears on a tax return is confidential tax return information. The final regs permit the IRS and whistle-blowers to disclose and discuss confidential tax return information after both parties sign a contract for services. The regs note, however, that the scope of these contracts will likely be narrow, and that they will be entered into only infrequently.

Once whistle-blowers sign on the dotted line, they gain the right to query the IRS in writing on the status of their claims. This is no small concession on the IRS’ part, since even this information normally can’t be disclosed. Under the regs, information disclosed by the IRS to whistle-blowers must again be kept confidential. And the IRS takes this seriously. The regs allow the IRS to inspect whistle-blowers’ homes, if confidential tax return information will be stored there.

Warning: Whistle-blowers will be subject to civil and criminal penalties for the unauthorized disclosure of tax return information.

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