Tax Court Delivers Victory For Tax Whistleblowers

In a significant pro-whistleblower decision yesterday, the Tax Court in a decision 144 TC 15 (Whistleblower 21276-13W v. IRS) made it clear that the IRS couldn’t deny a whistleblower an award because they filed a request for an award after the IRS had collected the fines and penalties from the targeted business.  The whistleblowers’ extensive cooperation with IRS and law enforcement agents was directly responsible for the IRS collecting a large monetary penalty from the targeted business.  Shortly after the IRS successfully concluded its case against the targeted business the whistleblowers filed a claim for an award under the IRS whistleblower program citing their extensive assistance to the IRS during the investigation.

The lead counsel representing the whistleblower in Tax Court was National Whistleblower Center (NWC) advisor Dean Zerbe of ZFFJ law firm. NWC Executive Director Stephen M. Kohn and NWC General Counsel David K. Colapinto were also counsel for the whistleblowers. This is the first evidentiary trial for tax whistleblowers that has been held by the Tax Court.

Of particular note – the IRS at first said that the two tax whistleblowers (a husband and wife) hadn’t provided any information to help the IRS in a letter sent to the whistleblowers. It was only after filing in Tax Court and getting discovery that the whistleblowers were able to get to the truth — that in the words of the capable FBI agents who worked with the whistleblowers:

“. . . but for the work, information and effort [of the whistleblowers] in assisting the government’s successful action against [the taxpayer], as it was carried out, would not have been possible.”

According to Mr. Zerbe, “The reality for tax whistleblowers – the lesson from this case is that you need to look hard before accepting statements from the IRS about your whistleblower case.”

The whistleblowers blew the whistle on a taxpayer who was helping millionaires and billionaires avoid taxes. “It is all the more frustrating that with all the rhetoric in Washington, D.C. talking about ‘equity’ and ‘fairness’ that the IRS and Treasury seem to be burning the midnight oil trying to prevent tax whistleblowers from getting an award – instead of putting out the welcome mat,” added Mr. Zerbe.

“Today is a day to celebrate a good win for tax whistleblowers,” said Stephen M. Kohn.

“The NWC hopes that the administration will finally do right and provide the whistleblowers here – in a case where one of the whistleblowers (the wife and mother of two young children) put her life at risk to help the government with her case. The government needs to give the whistleblowers the highest award on the full $74 million dollars that was collected,” Kohn added.