For those of you interested in tax whistleblower cases, the April 2009 edition of the False Claims Act & Quit Tam Quarterly Review (published by and available from TAF) contains a lengthy interview with Stephen A. Whitlock, the Director of the IRS Whistleblower Office. He discussed the procedures for submitting tax whistleblower claims, and how the IRS makes decisions about whether or not to pursue those claims. He offers a number of practical tips for whistleblowers and their attorneys. And, in a particularly interesting passage, he offers his take on the type of cases that the IRS would most like to see.
He was asked, “are there particular types of cases that the IRS is interested in, or particular industries that are more attractive to the IRS?”
He answered: “We try to touch a little bit of everything in different ways because the tax system is that complex. We try to have some presence in every aspect of the tax law.The largest corporations tend to be under audit nearly continuously. Issues on international tax noncompliance are getting more attention in recent years because of globalization of the economy. There have been some congressional hearings recently about those kinds of questions where large corporations –multinationals–have the ability to take advantage of the tax code and their business structure to reduce their tax liability. Sometimes that is permitted by the tax code, and sometimes it is not. That is an area of focus—to identify those areas where it is not permitted, but somebody is pushing the envelope.
Someone who is not filing and paying—that is always of interest to us. High-income non-filers are especially interesting to us. Define ‘high income’ how you want to, but we generally look at six figures, $200,000, $250,000 in gross income.
We have concerns in the areas of ‘trust funds,’ where a taxpayer is an employer and is withholding from their employees, in order to cover the employees’ personal tax liability. When you have someone who is acting in effect as a trustee for the federal government by withholding tax from employee wages, but then says ‘You know, I’m having a little trouble with the business. I’m going to pay my bills before I pay the tax bill.’ That’s an area that has been an enforcement priority for many years.”
Mr. Whitlock went on to note that these issues are not the only ones of interest to the IRS. As he put it, “if there is serious tax noncompliance, if there’s evidence that there is real money involved in it, the Service is going to be interested.”