The IRS Cuts Off Its Nose To Spite Its Face

Congress has long sought to encourage citizens to turn in people suspected of cheating on their taxes.  The government refers to these would-be informants as whistleblowers.  Despite congress’ intention the IRS has never been fond of whistleblowers.  The agency’s antagonistic attitude towards whistleblowers has been well documented.[i] The IRS has perpetuated this attitude despite the fact that the most recent tax gap calculated by the IRS, the difference between what the IRS collects and what it is owed, was estimated at $450 billion.[ii] In 2006, Congress enacted legislation which substantially strengthened the IRS’ Whistleblower Program.[iii]   This legislation created protections for the whistleblower in the form of minimum rewards and the ability to appeal the IRS’ determinations to the Tax Court. This gives potential whistleblowers the ammunition they need to hold the IRS accountable by allowing the Tax Court to make the IRS pay the rewards congress intended the whistleblower to receive.

Despite these increased protections, the IRS recently announced that it will be reducing all rewards paid to whistleblowers as part of its latest cost cutting plan, a result of the recent sequester.[iv]  What the IRS neglected to say is that whistleblowers are not paid from agencies operating budget, but instead receive a percentage of the tax collected because of their tip. The IRS has yet to identify its statutory authority for this announcement and it is likely that it will be challenged in court. This announcement shows that the IRS will continue to do all it can to thwart potential whistleblowers. If you have information that could lead to the IRS collecting taxes from someone who is not paying their fair share it is important that you are represented by someone who can protect your rights and fight against the IRS to make sure that you are paid the reward you are entitled to. The experienced Phoenix tax attorneys of the Dana Law firm are your best advocate in all dealings with the IRS.

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