A month ago on this blog I said “The first tax whistleblower award payments under the enhanced provisions of section 7623(b) are imminent, likely within the next couple months or sooner.” I got a lot of questions from colleagues and clients about it, and now I can say I told you so.
In the early morning hours of Friday, April 08, 2011, word of the first confirmed payout under the enhanced award provisions of section 7623(b) spread like wildfire. An APNewsBreak released at 3:16AM declared that:
An in-house accountant who raised a red flag about a tax lapse that his employer then ignored, leading him to tip off the IRS, has received $4.5 million in the first IRS whistleblower award.
The IRS cut a $3.24 million check to the whistleblower, which represents 22 percent of the taxes recovered minus 28 percent tax withholding. (This is not the last word on the validity of the withholding here, we assure you.) The underpayment was reported to the IRS Whistleblower Office in 2007. The IRS did not deem the issues he raised complex; however, the information his client provided pointed out new questions for a routine IRS audit that was already under way.
The award payout is tangible evidence that the program is working and has begun to bear fruit. The enhanced award provisions, found in section 7623(b) of the Internal Revenue Code, mandating awards of 15 to 30 percent of the collected proceeds for information leading to the collection of at least $2 million took effect in December of 2006. The program’s slow start has been discouraging to some, including Senator Charles Grassley who was the primary drafter of the enhanced award provisions and long-time champion of whistleblowers.
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