Tax Whistleblower Blog

Many Wrongs do not Make a Right

In the recent case, Schmidt v. IRS, 101 AFTR 2d 2008-XXXX, 05/15/08, Schmidt, a Tax Whistleblower, brought suit in the wrong court, under the wrong legal theory, for which the claim was wrongly processed (i.e. no contract) and for which the United States (IRS) did not waive sovereign immunity.

 It is often amazing to many individuals, including legal professions that Tax Whistleblowers will not engage proper legal representation.  Schmidt, in the above cited case, with so much at stake (10% $12,370,600), handled his case pro se.  Pro se is a Latin adjective meaning “for self”, that is applied to someone who represents himself or herself without a lawyer in a court proceeding, whether as a defendant or a plaintiff.

Both the Internal Revenue Code and the procedures of processing a claim through the Tax Whistleblower Program can be complicated.  Not only is the average person not qualified or experienced to process these types of cases, but attorneys handling divorces, personal injuries and qui tam actions may not be qualified to properly represent a Tax Whistleblower in their claim before the Internal Revenue Service.  An experienced tax attorney should have a minimum of three goals in representing a Tax Whistleblower in their claim.

The goals in the order of priority are as follows:

• prepare the claim and all documentation to assure acceptance of the claim by the IRS
• add value to the claim by turning a minimum 15% claim into a 30% claim (a good experienced tax attorney will pay his fees by accomplishing this step)
• completing as much of the upfront work so as to reduce the examination time by the IRS, thereby shortening the time in which the reward is paid out to the whistleblower

There are also other advantages of finding the right tax whistleblower attorney.  There are attorneys that will -

·         institute steps to protect their client’s identity

·         guarantee the confidentiality of their clients

·         appeal the reward, as ultimately determined by the IRS at no additional cost. (perhaps, Schmidt should have done his research before proceeding pro se)

Although the above cited, in dicta, reiterated that under the old statute (prior to December 20, 2006) the IRS has the discretion to determine the amount of the reward to pay to a whistleblower.  As stated in IRC § 7623(b), for cases submitted after December 20, 2006, the IRS is to pay a minimum reward of 15% of the amount ultimately collected.  The maximum reward is 30% of the amount collected.

Perhaps Schmidt now knows the importance of working with the right Tax Whistleblower Attorney.