The Tax Times: Get Your Whistles Ready - IRS Issues Final Regs. on How To Get Your Reward!

IRS has issued final regs that provide comprehensive guidance for IRS' Code Sec. 7623 award program (i.e., whistle blower awards).

Summary. These regulations provide comprehensive guidance for the award program authorized under Internal Revenue Code (Code) section 7623. The regulations provide guidance on:

Submitting information regarding underpayments of tax or violations of the internal revenue laws and filing claims for award,
The administrative proceedings applicable to claims for award under section 7623.
The regulations also provide guidance on the determination and payment of awards, and provide definitions of key terms used in section 7623.
Finally, the regulations confirm that the Director, officers, and employees of the Whistle blower Office are authorized to disclose return information to the extent necessary to conduct whistle blower administrative proceedings.

The regulations provide needed guidance to the general public as well as officers and employees of the IRS who review claims under section 7623.

Background. Under Code Sec. 7623(a), IRS has discretionary authority to pay awards to informants (i.e., whistle blowers) in the sums it considers necessary for the detection of tax underpayments, or for the detection, trial, and punishment of tax law violators, payable from amounts collected by reason of the information provided. Under Code Sec. 7623(b), individuals, in certain cases, are entitled to receive an award of 15% to 30% of the “collected proceeds” resulting from an action based on information provided by the whistle blower. IRS has established a Whistle blower Office to administer the program.

Under Code Sec. 7623(b)(3), IRS may appropriately reduce a Code Sec. 7623(b) whistle blower award where the claim for the award is brought by an individual who planned and initiated the actions that led to the underpayment of tax or the violation of the tax laws.

In December of 2012, IRS issued comprehensive proposed regs on the whistleblower program . IRS has now finalized those regs, with minor changes. (See our post IRS Proposes Regulations and Guidance for Whistle blowers!).

Filing a claim. In large part, the final regs track the previously issued guidance in the existing regs, Notice 2008-4, 2008-1 CB 253 , and the Internal Revenue Manual, including the general information that individuals should submit to claim awards and the descriptions of the type of specific and credible information on taxpayers that should be submitted.

An individual submitting a claim should identify a person and describe and document the facts supporting the claimant's belief that the person owes taxes or violated the tax laws. The regs also reaffirm IRS's practice of safeguarding the identity of individuals who submit information under Code Sec. 7623 whenever possible. (Reg. § 301.7623-1 )

The final regs include eligibility requirements for filing claims for awards and a list of ineligible claimants. In finalizing the regs, IRS has removed State and local government employees and members of a Federal or State body or commission from the categories of ineligible whistle blowers.
The final regs require individuals to file a formal claim for award, Form 211, Application for Award for Original Information. The regs allow IRS to specify an alternative submission method (such as electronic claim filing) pursuant to additional guidance.

Under the final regs, in cases in which the Whistleblower Office recommends payment of an award under Code Sec. 7623(a), the whistleblower administrative proceeding begins when the Whistleblower Office send a preliminary award recommendation letter to the claimant. The claimant has 30 days to respond with comments. This period may be extended at the sole discretion of the Whistleblower Office. (Reg. § 301.7623-3(b)(1)).

Disclosure. The final regs also confirm that the Director, officers, and employees of the Reg. § 301.6103(h)(4)-1(b)).
Whistleblower Office are authorized to disclose return information to the extent necessary to conduct whistle blower administrative proceedings.

Effective date. Reg. § 301.7623-1 , Reg. § 301.7623-2, Reg. § 301.7623-3, and Reg. § 301.6103(h)(4)-1 apply to information submitted on or after Aug. 12, 2014, and to claims for award under Code Sec. 7623(a) and Code Sec. 7623(b) that are open as of Aug. 12, 2014. Reg. § 301.7623-4 applies to information submitted on or after Aug. 12, 2014, and to claims for award under Code Sec. 7623(b) that are open as of Aug. 12, 2014.

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Want a Reward of Between 15- 30%
of Underpaid IRS Tax Liabilities for

Blowing the Whistle on a Tax Cheat?

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Contact the Tax Lawyers at

Marini & Associates, P.A.