Tax Whistleblower Blog

Tax Shelter Schemes Are Potential Cases for Tax Whistleblower Rewards

During recent weeks I have been approached by several accountants with a similar question, “One of my clients was solicited by a Tax Shelter promoter to enter into what I consider an abusive scheme to create artificial deducitons or to hide income. I advised my client not to participate, and my client followed my advice. Can I turn-in the Tax Shelter promoter and receive a reward under the Tax Whistleblower Reward Program?” The answer to this question is a resounding “YES!” The IRS is very concerned about the proliferation of abusive Tax Shelters, and the IRS has expended an enourmous amount of resources in the past 7 years to successfully challenge the use of various Tax Shelters. If a client has been approached by a Tax Shelter promoter, it is likely that the client received promotional material, which explains the scheme and the arguments for how the purported tax benefits flow. This promotional material is very important to the IRS and is critical to understanding how the Tax Shelter is structured. Once a tax whistleblower provides the IRS with promotional material showing how a Tax Shelter is being promoted and the identity of the promoter, the IRS has devices it can employ to obtain the promoter’s client list. From this client list, the IRS can make assessments and collect tax. If the client list is extensive, the tax can be very large! While I was formely employed as an attorney for the IRS, I conducted multiple Tax Shelter investigations. Some cases resulted in the assessment and collection of hundreds of millions of dollars by the IRS. Thus, a tax whistleblower that tips off the IRS to one of these Tax Shelters could be entitled to a huge reward. The Tax Whistleblower Reward Program only accepts referrals where the amount of tax in question is in excess of $2,000,000. In addition, a referral to the Tax Whistleblower Reward Program must contain specific facts and information. Even though the accountant does not have specific information regarding the tax in question of other clients of the Tax Shelter, the IRS would eagerly accept and process the referral into the Tax Whistleblower Reward Program. The IRS knows that most well-organized Tax Shelters result in multi-million dollar tax losses to the government. The IRS eagerly awaits such referrals.