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Tax Court Denies IRS Motion


We have been working for Tax Whistleblowers since 2007.  During that time the tax courts, the IRS and the Justice Department have tried over and over again to limit the payouts to tax whistleblowers.  They throw up roadblocks and try to leverage the whistleblower into lowering the amount they are due in a case.  On January 31, 2017, in Washington, D.C. the United States Tax Court finally issued their final decision in case number 21276-13W v. CIR (147 TC 4).  This is a case where a husband and wife team reported to the IRS a huge corporate tax fraud scheme which they had important specific inside knowledge.  They had determined the corporation owed hundreds of millions of dollars in back tax revenue.  When the IRS investigated they agreed with the couple.  But the IRS took their investigation one step further. They also found the corporation was subject to fines and penalties for a lot of the tax revenue that was unpaid.

The question became whether the whistleblowers were entitled to not only their proper share of the recovered unpaid taxes but whether they were also due a percentage of the penalties and fines.  The difference would be worth millions and millions of dollars to the husband and wife whistleblowers.

We supported the right of whistleblowers to take part in 100% of all the proceeds recovered by the government.  When the trial court decided in favor of the whistleblowers the QuiTam world rejoiced.  They the government didn’t stop there. They appealed the decision and the total award of $17,791,706 to the husband and wife.

Yesterday, in making the newest order the Judge denied the IRS and their Motion for Reconsideration.  This created a process called a Final Decision which will keep the previous “landmark whistleblower victory” within favor of whistleblowers. The IRS made every argument possible for why the IRS should not live with a broad concept of what whistleblowers are due.  They even went so far as to say that there were not enough funds available to award these additional payments.  Their argument fell on deaf ears.   Now it is set that whistleblowers have a right to a wide definition of what the Tax Court will consider “collected proceeds.”

It will be interesting to see if Steve Mnuchin, the most likely new Treasury Secretary, and the Trump administration embrace the benefits of whistleblowers.  I am sure most governmental officials support the IRS going after the biggest tax evaders, but we have a less clear vision from this particular president.  In Mr. Mnuchin’s confirmation hearings has was asked by Senator Grassley (who incidentally is the most vocal supporter of strong Whistleblower laws) if he wanted a broad definition of “collected proceeds” or a narrow one; and whether he would support strong whistleblower protection laws.  Mr. Mnuchin answered that he would be supportive of the IRS whistleblower program and laws.  He also said on his own that the administration is “…aware there is tax fraud.  There is tax fraud as you said, and we need to be diligent and I believe that the whistleblower laws are a very important part of that.  I will work very hard with you on that.”

Mr. Steven Kohn as the director of the National Whistleblower Center made the best point: “The Tax Court decision gives Mr. Mnuchin the perfect opportunity to do the right thing, accept the Tax Court ruling in favor of whistleblowers, and make it clear to all the tax crooks that the new administration is putting out the welcome mat for tax whistleblowers.  By honoring his commitment to Senator Grassley on “collected proceeds,” Mr. Mnuchin will do right by the American people and honest taxpayers.”

Why wouldn’t the IRS make this happen?  There is no other government program where the money comes rolling in with little to no additional expense.  The cost of tracking IRS tax cheats is very high.  The government does not catch many of them. Whistleblowers bring the government right to the money.  They point out exactly who are the biggest offenders.  Then they deserve to be paid.  The problem is that without a whistleblower attorney the IRS will work to limit or end the whistleblower’s right to collect.  The claim must be made perfectly and properly to assure the award is paid in the end.

LaBovick Law Group has a specialty division for Qui Tam Tax Fraud.  This is our favorite law type.  We have a forensic accounting attorney on staff who can both understand your complex tax fraud questions and who will work with you hand in hand to show the IRS exactly why and where they need to look. At the same time, we will protect your claim to a large portion of the collected proceeds.  Don’t go this alone.  Call Marcie Dodson, JD.  She will give you the time necessary to properly understand your complex tax scheme analysis.  Call (561) 623-3681 for a free consultation.

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