One of the biggest improvements the 2006 amendments made to the IRS Whistleblower program was providing the right to appeal an award determination for claims that meet the requirements for the enhanced award provisions, mainly that the amount in controversy is more than $2 million. Prior to the 2006 amendments taking effect, the payment of an award was entirely at the discretion of the IRS with no oversight or review outside of the IRS. The 2006 amendments to section 7623 changed this by creating the right of judicial review by the Tax Court.
The problem with the discretionary award program was that there was no mechanism to force the IRS to pay an award if they used a whistleblower’s information, nor was there a way for the whistleblower to find out if the IRS ever actually used his information. This problem was clearly illustrated in the case of Robert Coleman v. United States, No. 10-219T (Ct. Fed. Cl. Jan 28, 2011) (PDF). In case the Court of Federal Claims was forced to dismiss Mr. Coleman’s suit appealing the IRS’s determination to deny him an award for the information he provided for lack of jurisdiction because there was no provision in the Internal Revenue Code mandating that the IRS pay Mr. Coleman an award at the time he reported this information to the IRS. Mr. Coleman alleged in his suit that he provided the IRS with information regarding his mother’s accountant, who had embezzled money from her and failed to report this income. Mr. Coleman sought to appeal the denial of his claim after Mr. Coleman learned that his mother’s former accountant had pled guilty to filing false tax returns, and was ordered to pay an undisclosed amount in back taxes.
Mr. Coleman will likely never know if the information he provided to the IRS lead to the conviction and collection of an undisclosed amount of tax from the accountant who had embezzled from Mr. Coleman’s mother because Mr. Coleman did not have the opportunity to have his claim reviewed. A point more fully discussed by William P. Barrett in his blog post Another Good Reason To Hate The IRS. He certainly believes it did, and without having a copy of the IRS’s administrative file we will never know either. Under the old IRS Whistleblower law, whistleblowers had no assurance that they would be treated fairly.
Under the current statute, whistleblowers that meet the minimum requirements of the enhanced award provisions have an avenue to appeal the IRS’s award determination to the US Tax Court. However, many whistleblowers who don’t meet those minimum requirements still won’t have a mechanism to ensure fair treatment by the IRS. The bounds of the Tax Court’s ability to review award determinations have yet to be tested. However, well-represented tax whistleblowers whose cases meet the requirements for the enhanced award provisions are able to ensure a fair award determination in court. If the IRS tries to avoid paying an award where the IRS has used the information provided and collected taxes, whistleblowers can enforce their rights to an award.
Recent Comments