• LinkedIn
  • YouTube
  • Twitter
  • Facebook
  • Google+

Whistleblower can’t hide

Get PDF file

by on
in Small Business Tax

If someone “blows the whistle” on a tax cheat, the IRS may reward the informant. Currently, the whistleblower award must equal at least 15%, but no more than 30%, of the amount collected in the investigation. The program generally applies when taxes, penalties and interest owed by a business exceed $2 million or $200,000 for an individual.

But a whistleblower can’t hide behind the IRS when a case is brought to the Tax Court. The public has a right to know the accuser’s identity, unless he or she can prove a pressing need to be anonymous.

New case: The whistleblower (we’ll call him John Doe) is a self-described “analyst of financial institutions.” He had alleged that a corporation had skipped out on almost $100 million in taxes based on information he gleaned from public sources, including the Securities and Exchange Commission. Fearing he would suffer financial and physical harm if his identity were disclosed, Doe initiated a motion for special protection.

Doe had 11 cases pending before the Tax Court, involving 21 whistleblower claims and possibly as many as 50 separate taxpayers.

In the past, the Tax Court had addressed a whistleblower’s motion to proceed anonymously just five times. Unlike the claimants in three of the cases, Doe offered no concrete proof that he had been threatened physically or that this might occur. Also, he wasn’t claiming an employee relationship, which might be adversely affected.

In addition, unlike the whistleblowers in the other five cases, Doe had not identified someone who had the capability and would be likely to hurt him. Although he might be subjected to embarrassment or vile language, the Court found that his fears of marital discord, alienation of unnamed business partners and retribution from unnamed political figures to be purely speculative.

Finally, the Tax Court also noted that Doe had derived the information from public sources, in what was turning out to be a “cottage industry” of sorts for those looking to earn hefty rewards from the IRS. There is some concern that providing greater protection to whistleblowers in these situations, in the form of complete anonymity, could lead to abuses and flood the court dockets.

Overall, Doe’s lack of connection to the defendant suggests that his argument is without merit. Accordingly, the Tax Court dismissed the motion. (Whistleblower 14377-16W, 148 TC No, 25, 6/28/17)

Related Articles...

Leave a Comment