IRS Awards $4.5M to Whistleblower

An in house accountant that raised concerns over 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 accountant’s tip, netted the IRS $20 million in taxes and interest from the errant financial-services firm. The reward given amounts to about 22% of the taxes that were recovered. This program with the IRs is designed to encourage tips in which awards amount to 15 to 30% in the amount recovered.

“It ought to encourage a lot of other people to squeal,” Sen. Charles Grassley told The Associated Press. The Iowa Republican helped get the IRS Whistleblower Office authorized in 2006. Fox News

The accountant’s lawyer received a check in the amount of $3.24 million that arrived in suburban Philadelphia by first-class mail Thursday. The sum represents the award minus a 28 percent tax hit. Attorney, Eric L. Young of Blue Bell, won’t release the name of his client or the firm because his client remains a small-town accountant, and hopes to continue to work in his field.

“It’s a win-win for both the government and taxpayers. These are dollars that are being returned to the Treasury that otherwise wouldn’t be,” Young said. “It’s very difficult to be a whistleblower,” said Young, who has represented more than a dozen such tipsters, including one in a $2 billion Pfizer case involving off-label drug marketing. “Most people would be inclined to turn a blind eye to it. The process can be time-consuming, arduous and stressful, from both a personal and professional standpoint,” he said. Fox News

In 2007, the accountant filed the claim with the IRS, just as the IRS Whistleblower Office opened, but heard nothing for two years. Frustrated, he hired Young to help push the issue. The IRS did not deem the issues he raised complex. But the agency said the information he shared pointed out new questions for a routine IRS audit that was already under way.

Between 2008 and 2009, the Whistleblower Office received nearly 1,000 tips involving 3,000 taxpayers. Hundreds of them alleged tax underpayments of more than $10 million, and dozens more underpayments of $100 million or more.

“Quite frankly, I’m shocked that they finally got around to using it,” said Grassley. He has been discouraged by the program’s slow start, which some blame on ambivalence about whether tipsters should receive potentially huge windfalls. The IRS may also fear embarrassment, the senator said. “When you got a whistleblower that’s saying somebody didn’t pay $20 million in taxes, that that’s an embarrassment to the full-time employees of the IRS,” he said. Fox News

Neither Stephen Whitlock, director of the Whistleblower Office, nor the agency’s public affairs office returned messages about the program late Thursday. The office has about 17 employees, who refer complaints to IRS agents and investigators around the country to pursue. And before 2006, the IRS could choose to reward tipsters, but were under no obligation to pay them a share of the taxes recovered. Many of the tips involved mom-and-pop operations or ex-spouses.

The whistleblower program only promises awards for returns of $2 million or more.