Kenney & McCafferty, PC A law firm providing help, information and protection to Tax Fraud Whistleblowers in all 50 states.
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Click here for a confidential tax fraud case evaluation! Kenney & McCafferty, PC works exclusively with individuals who would like to obtain a monetary reward from the IRS for blowing the whistle on individuals and/or corporations that have committed tax fraud in monetary amounts of $2 Million Dollars or more.
The Tax Relief and Health Care Act of 2006, signed into law on December 20, 2006, amended the Internal Revenue Code to provide for substantially increased rewards for whistleblowers.
The new law applies to claims for reward in cases in which the potential amount owed to the IRS for taxes, penalties, and interests exceeds $2 million and, in cases of individuals, the taxpayer’s gross annual income must exceed $200,000.
The new law provides a minimum reward of 15% and a maximum reward of 30%. This is a substantial increase over the previous regulations that provided a minimum recovery of 1% and a maximum recovery of 15% for whistleblowers.
The new law also provides that IRS must make a reward payment in those cases in which pursues a remedy against a taxpayer based upon information provided by the whistleblower. This mandatory requirement that the IRS pay a reward is a drastic change from the previous regulation that, in effect, gave the IRS the discretion to decide whether a reward was appropriate in any given circumstance.
The new law also provides the whistleblowers the right to appeal a reward to the Tax Court. Again this is a significant change to existing law strengthening the rights of whistleblowers, who under previous regulations could not appeal a decision by the IRS as to the amount of a reward or whether a reward was appropriate.
The new law does place a cap of 10% on rewards if the IRS determines that the whistleblower’s information was not the original source of information but still contributes to the additional collection. Whistleblowers who planned or initiated the tax scheme may be barred from recovering a reward.
In February 2007, the IRS named Stephen Whitlock the first director of its new Whistleblower Office. The statute, which was enacted on December 20, 2006, provides that, within twelve months of the enactment of the new law, the Whistleblower Office shall be handling claims submitted under the new law. The new law will apply to any claims submitted after the date of enactment of the new law on December 20, 2006.
The IRS is in the process of implementing regulations to implement the new law B.) IRS Form 211 Rewards The IRS’s Form 211 Reward Program allows whistleblowers to recover rewards.
Amount of Reward
Rewards range from 1% to 15% of amounts the IRS collects as a result of the whistleblowers information, including taxes, fines, and penalties, but not interest, up to a maximum of $10 million.
Reward Determinations
The IRS has the discretion to determine whether a reward is appropriate and the amount of the reward. The IRS generally considers the following factors in making reward determinations:
1.) For specific and responsible information that caused the investigation or, in cases already under audit, materially assisted in the development of an issue or issues and resulted in the recovery, or was a direct factor in the recovery, the reward shall be 15 percent of the amounts the Service recovers, with the total reward not exceeding $10 million.
2.) For information that caused the investigation or, in cases already under audit, caused an investigation of an issue or issues, and was of value in the determination of tax liabilities although not specific, the reward shall be 10 percent of the amounts the Service recovers, with the total reward not exceeding $10 million.
3.) For general information that caused the investigation or investigation of an issue or issues, but had no direct relationship to the determination of tax liabilities, the reward shall be 1 percent of the amounts the Service recovers, with the total reward not exceeding $10 million. 4.) A combination of reward rates may apply in certain cases: If the recovery is attributable to information that pertains to more than one of the above categories, the Service will apply the respective rates of reward.
The IRS can deny payment of a reward for the following reasons:
1.) The information furnished by the informant was of no value.
2.) The IRS already knew the information or it was available in accessible public records.
3.) Where the IRS determines that the payment of a reward would be inappropriate; for example, when the whistleblower participated in the evasion scheme or prepared the return for the taxpayer with knowledge that taxes were being evaded.
4.)The whistleblower obtained, or furnished, the information while a Department of Treasury employee.
5.) The whistleblower obtained the information as part of his/her official duties as an employee of any other Federal agency.
6.) The whistleblower obtained or furnished the information while a State officer or member of a State body or commission having access to Federal returns, copies or abstracts.
7.) Payment would be contrary to State or local law.
8.) The IRS will not pay a reward if the recovery was so small as to call for payment of less than $100.00 under the above formulas. Whistleblower Anonymity
The IRS has given formal assurances that it will not disclose the identity of whistleblowers to unauthorized persons. There are, however, limited circumstances in which the identity of the whistleblower can become known. You should discuss these possibilities with your attorney or directly with the IRS. For instance, if a whistleblower is called to testify in a proceeding against the taxpayer, the fact that the whistleblower is entitled to a reward must be disclosed. Eligibility for Reward
You are eligible to seek a reward unless: 1.) You were employed by the Department of the Treasury at the time you received or provided the Information; or
2.) You are a present or former federal employee who received the information in the course of your official duties. An executor, administrator, or other legal representative may file a claim for reward on behalf of a decedent if the decedent was eligible to file such a claim before his or her death. The representative must attach to the claim evidence of authority to file it. IRS Investigations
IRS investigations generally take years to complete. Rewards are generally not paid until an investigation is complete and taxes, penalties, fines and interests are paid, though in exceptional circumstances a partial reward can be paid before all monies are collected. A whistleblower should not anticipate receiving a reward in less than three years; though in exceptional circumstances rewards are sometimes obtained sooner.
Federal law prohibits the IRS from sharing with the whistleblower specific actions taken by the IRS with regard to the taxpayer.
C.) IRS Special Agreement Reward Program
The IRS will sometimes enter into a written contractual agreement with a whistleblower, known as a “Special Agreement”.
The IRS enters into Special Agreements only in exceptional circumstances involving large underpayments of taxes. The terms of a Special Agreement may vary but they often guarantee a specific percentage of the monies recovered to the whistleblower. Potential Benefits of A Special Agreement
1.) Special Agreements often provide that the IRS will pay to the whistleblower a specific percentage of the monies recovered as a result of the whistleblowers information. Thus the Special Agreement removes the IRS’ discretion to issue a reward of anywhere from 1% to 15% of a recovery that currently exists under the form 211 program.
2.) Special Agreements can raise the limits on rewards above the $10 million cap that currently exists under the IRS Form 211 program and can also raise the percentage of the reward above the 15% limit currently in existence under the Form 211 program. 3.) Special Agreements are written contracts and therefore can be enforced against the IRS by the whistleblower if the whistleblower does not believe that the IRS has complied with the terms of the Special Agreement.
Negotiating a Special Agreement
Special Agreements create specific obligations on the part of the Government and the negotiation and approval process is complex. For instance, the Special Agreements should be negotiated with the IRS before the whistleblower provides all information to the IRS, and yet the IRS must be provided sufficient information to agree to the terms of the Special Agreement. There are various means through which this can be accomplished, but those means should be agreed to in advance before the whistleblower’s representative contacts the IRS to discuss the terms of a Special Agreement. Whistleblower Anonymity
As with the Form 211 Program, the IRS has given formal assurances that it will not disclose the identity of whistleblowers to unauthorized persons. Under the Special Agreement procedure, whistleblowers may enter into a contractual arrangement with the IRS without revealing their identity in the first instance. (An intermediary, such as an attorney, may be used). However because Special Agreements require by their terms that the whistleblower will cooperate with the government, the whistleblower may be required to disclose his or her identity to the Government during its investigation and resolution of the alleged scheme.
There are, however, limited circumstances in which the identity of the whistleblower can become known. You should discuss these possibilities with your attorney or directly with the IRS. For instance, if a whistleblower is called to testify in a proceeding against the taxpayer, the fact that the whistleblower is entitled to a reward must be disclosed.
Report IRS Tax Fraud at www.irsrewards.com
Kenney & McCafferty, PC 3031C Walton Road, Plymouth Meeting, PA 19462
We take calls 24/7, including nights, weekends and holidays. Call our 24 Hour Fraud Hotline by Dialing Toll Free 1 (888) 482-6825 Outside the USA Dial (610) 400-7560 - Ask for Investigator Sweeney
FAX Toll Free 1 (888) 609-5755 Outside the USA Dial Fax (610) 471-0544
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