Tax Whistleblower Blog

IRS Tax Whistleblower Office Is Serious. (Part 1 of 3)

In operation just over a year, the IRS is showing that it is serious about the new Tax Whistleblower Law (IRC § 7623).  Congress expected big things from the tax whistleblower legislation it passed, which took effect on December 20, 2006.  The IRS has stepped up to the plate and is responding timely and appropriately. 

 The Internal Revenue Service responded first with the appointment of its director Stephen Whitlock.  Although coordination and implementation are difficult in such a large organization, it has been through Whitlock’s leadership, with the support of both his trained and experienced staff, along with the backing of IRS management, that there have been a series of rules, notices, regulation changes, forms (updated and new), IRM changes, etc. implemented to deal with the numerous issues that exist in this uncharted territory.   As issues arise they are being discussed and dealt with little delay.  There are no secrets.  Transparency is the key.  The tax whistleblowing process should not be a mystery or secret.  The new Whistleblower Office is not an empty office that simply logs in cases.  It is an office of highly trained (and experienced) analysts that evaluates each case for qualification under the program and coordination with the appropriate IRS Operating Division. 

As stated in a recently issued memorandum dated July 21, 2008 from Frank Y. Ng, Commissioner LMSB, the IRS has set forth the steps to coordinate a case submitted to the IRS Whistleblower Office with the SME (Subject Matter Expert) in the various operating divisions of the IRS.  It is not the Whistleblower’s Office responsibility to conduct the examination, obtain consents to assessments, issue notices of deficiency, or get involve in the collection process.  It is the job of the Whistleblower Office to perform Step 1 of the 3 Step Process.

Step 1 - Receipt of Information and Initial Review, which includes:

• Receive and Review the Whistleblower Information;
• Enter Indentifying information into the Tracking System;
• Determine if the Case meets threshold analysis of being a potential 7623(b) case and/or “high impact” case; and
• Direct the case appropriately, based upon review and analysis, to OSC (Ogden Service Center) for IRC 7623(a) cases, for fraud referral, to CI for criminal investigation, and/or coordinate with the proper Operating Division and appropriate SME (Subject Matter Expert). 

The Tax Whistleblower program appears to be the newest tool in the IRS arsenal for tax compliance and tax enforcement.  Initial indication is that the cases being submitted to the Whistleblower Office deal with issues that could never have been discovered by the IRS in the past without significant time and effort. 

Part 2 of 3 – Step 2 Operating Division’s Subject Matter Expert’s Analysis

Part 3 of 3 – Step 3 Risk Analysis