The IRS Whistleblower Law

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DARRIN T. MISH: Good morning, and welcome to the IRS Solution Attorney Show. I am your host, the IRS Solution Attorney, Darrin T. Mish.

KATRINA MADEWELL: I’m your cohost, Katrina Madewell. Welcome to the show this morning. We’re glad you’re here.

DARRIN T. MISH: How are you doing, Katrina?


DARRIN T. MISH: It’s a wonderful day in the neighborhood.

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KATRINA MADEWELL: You say that every week. Most weeks.

DARRIN T. MISH: Most of the time.

KATRINA MADEWELL: What do we have lined up today?

DARRIN T. MISH: We’re doing a show that’s a little bit different for me. It’s all about the IRS Whistleblower Law.

KATRINA MADEWELL: We’ve never talked about this on the show.

DARRIN T. MISH: No, we haven’t, and I’m conflicted about it. I represent taxpayers. I never represent the government. I have never represented the government in any capacity. Even in my prior life before I was the IRS Solution Attorney, representing taxpayers with the IRS. I used to represent people charged with crimes.

KATRINA MADEWELL: You never wanted to work for the government?

DARRIN T. MISH: No, to say the least. That was never appealing to me. Not that there is a problem with people who do. I have friends that are former prosecutors. Here’s the caveat with regard to this show. If you were interested in whistleblowing on a taxpayer to the IRS in order to receive the reward or just to get even, don’t call my tax attorney office. I’m not interested. I’m not going to help you with the whistleblower award. It’s not my thing.

KATRINA MADEWELL: Do you know what comes to mind when I hear this? Five-year-olds saying “Tattletale! Snitch!” What’s the saying that kids have? Snitches get stitches.

DARRIN T. MISH: The word “rat” keeps coming into my head. Sometimes when you’re a criminal defense attorney, like I was in a prior life, being a snitch or a rat, it’s kind of the only thing you have.

KATRINA MADEWELL: Here’s the thing that’s fascinating is that there is an IRS whistleblower law for people that don’t pay taxes. Most people probably didn’t know that. I didn’t know that.

DARRIN T. MISH: It’s big business too. The idea is the IRS has a program and what they do is reward people who blow the whistle, basically, rat, provide information to the government about people who are not compliant with the tax laws. In exchange, there is a reward. That’s the bottom line.

KATRINA MADEWELL: I’m trying to think about this from the other side. We’ve talked about some of these people that live the high lifestyle and they’re bragging. I could see someone that might be buddies or maybe if they’re not their buddy and pay all their taxes and this guy is living the high life and not paying a dime in taxes.

DARRIN T. MISH: I know people in my private life that have nothing to do with my law practice that they go around bragging about how they don’t pay any taxes. In my professional life Is ee people all the time. Day after day who make lots of money and don’t bother paying taxes. That’s who I represent.

KATRINA MADEWELL: I just don’t know why someone would brag about it.

DARRIN T. MISH: People can’t help it. I think human beings want to be admired. They just want to brag.

KATRINA MADEWELL: What percentage of people do that? That should be shameful, I imagine. If you had to guess of people that brag about not paying taxes, what’s the percentage?

DARRIN T. MISH: It’s hard for me to say because I run into so many.

KATRINA MADEWELL: So, your opinion would be skewed.

DARRIN T. MISH: Mine would be WAY skewed because that’s the universe I’m dealing in. Five days a week.

KATRINA MADEWELL: If I had to guess, I would say the number is low. 5-10% of people that would brag. I’m not saying that’s the percentage of people that don’t pay taxes. I’m just saying I think that would be the percentage of people that would brag about it.

DARRIN T. MISH: I bet it’s higher.

KATRINA MADEWELL: You would know.

DARRIN T. MISH: I bet it’s 20-40% of people who don’t pay taxes are going to tell somebody.

KATRINA MADEWELL: I don’t even know how you would get on the topic in general conversation because it’s not fun. If we were in a room with you, it might come up. but most people don’t want to talk about it.

DARRIN T. MISH: If I’m at a cocktail party, people want to come over and talk about taxes. What’s the last thing I want to talk about at a cocktail party? When you think and breathe and live taxes your whole life, every single day.

KATRINA MADEWELL: Can we just have a beer and be happy?

DARRIN T. MISH: Can we talk about stuff I like to talk about? Like guy stuff.

KATRINA MADEWELL: Fishing. This IRS whistleblower law, let’s talk about this a little bit more. When did this come around?

DARRIN T. MISH: This is a quote from the IRS Whistleblower Law Office Director, Lee Martin, “Whistleblowers have helped the IRS detect and deter tax non-compliance and avoidance. Helping to protect both the nation’s revenue collection and the integrity of our voluntary compliance tax system. Indeed, since 2007, information submitted by whistleblowers has assisted the IRS in collecting 3.4 billion dollars in revenue and in turn, the IRS has improved more than 465 million dollars in monetary awards to whistleblowers.”

That’s a lot of money that they collect. 3.4 billion. Although, in our national budget – assuming we have a budget, which we don’t…

KATRINA MADEWELL: We talked about the non-compliance people. What’s the guy’s name that went to jail? Remember him? He was all about don’t pay taxes, it’s non-constitutional.

DARRIN T. MISH: Tehre’s been a lot. The one you’re thinking about is Irwin Schiff. There’s another local guy called Eddie Kahan. He’s the one that convinced Wesley Snipes, who also went to prison, that it would be a great idea not to pay taxes.

KATRINA MADEWELL: Can you imagine? He used to hold a lot of seminars. Can you imagine them holding this seminar and then these people come in to figure out how to avoid taxes? Then there’s somebody that gets a list of names.

DARRIN T. MISH: The potential whistleblower goes out in the parking lot and starts taking pictures of license plates. He has a wire and he’s running video of everyone in there.

KATRINA MADEWELL: He calls the IRS, I’m going to make an appointment.

DARRIN T. MISH: Probably in the next segment, we’ll get into the nitty gritty about what’s required to get paid by the IRS in the whistleblower program.

KATRINA MADEWELL: Is it really that much money? Is it worth it?

DARRIN T. MISH: It’s a lot of money, for sure. You’ll find out here in a second. When the IRS whistleblower law office releases 2016 annual report to Congress, awards have jumped 322%, and the IRS has shelled out $164 million in awards since just 2015.

KATRINA MADEWELL: Wow. That’s a lot of money.

DARRIN T. MISH: There’s a lot of snitching going on. In my research, I found most of these are employees who are identifying the employers or big corporations are not paying “their fair share of taxes”. Whatever that word even means.

KATRINA MADEWELL: So employer/employee relationship? Then they report it?

DARRIN T. MISH: That’s what’s going on. There’s ferreting out of people who are on the inner workings. There are generally accepted accounting principles. In my opinion, accounting isn’t a science. There are lots of “right ways” to do accounting. Of course, the IRS would disagree. They would say their way is the right way. And their way changes, depending on the circumstances.

KATRINA MADEWELL: And the year and who’s in office.

DARRIN T. MISH: What I mean is it depends on the IRS’ way is always going to be what’s in the best interest of the government, not the taxpayer. maybe that’s a bit of a gross generalization. Typically, when you’re under audit, that’s what the IRS is going to come down on. They’ll say they don’t like the position a taxpayer takes because it means they get less revenue.

KATRINA MADEWELL: Is it anonymous? They probably have to give them their information if they’re going to get paid. I wonder if the person who got snitched on can ever find out who did it.

DARRIN T. MISH: Claims can be submitted anonymously and that person’s identity can be withheld. Not necessarily, it doesn’t have to be anonymous. I know there was a whistleblower program going way back, but in 2006, there was a law called the tax relief and health care act that established the IRS whistleblower law office inside of the IRS.

KATRINA MADEWELL: They have a dedicated office just for this?

DARRIN T. MISH: They have a dedicated staff that only handles IRS whistleblower law claims. It’s kind of like a subset of the IRS, but they have a dedicated office that handles it now.

KATRINA MADEWELL: Is that everywhere? Or just one location?

DARRIN T. MISH: I would imagine it’s in Washington, but I don’t know the answer to that question.

KATRINA MADEWELL: Interesting. I know you don’t condone the whole whistleblower thing, but it’s interesting that it’s even there.

DARRIN T. MISH: It’s not that I don’t condone it, it’s that I don’t want to handle it because I think it’s an inherent conflict. I don’t think I can handle both sides of that equation. I don’t think I can hold myself out as a champion of the taxpayer who is the little guy, but on the other hand, but if you want to rat somebody out, call me. The attorney fees are high in an IRS whistleblower law claim. I get a couple calls a year for them. It’s just something I don’t want to do. I’m more in it for the “little” guy. The “normal” guy. The guy whose life is being ruined because of the stress and anxiety that he owes the IRS tax money.

KATRINA MADEWELL: And he had a hiccup and we’re just trying to fix him and get out of it.

DARRIN T. MISH: Right. Not so much the opportunist who’s looking to get paid.

KATRINA MADEWELL: This is the IRS solution Attorney Show. We have to take a quick break, but we’ll be back in just a minute.

(commercial break)

KATRINA MADEWELL: Welcome back, this is the IRS Solution Attorney Show.

DARRIN T. MISH: I’m your host, Darrin T. Mish, the IRS Solution Attorney.

KATRINA MADEWELL: I’m your cohost. Thank for hanging with us during the break. Today’s show is all about the IRS whistleblower law.

DARRIN T. MISH: The IRS whistleblower law.

KATRINA MADEWELL: It’s all IRS related most of the time on this show.

DARRIN T. MISH: Here’s the disclaimer, if you’re interested in filing or pursuing an IRS whistleblower law claim, have it. Just don’t call my office. I’m not interested.

KATRINA MADEWELL: Just say I’m not your guy.

DARRIN T. MISH: I’m not your guy. I don’t even have a referral for you. There are people who do this kind of work almost exclusively. I typically represent taxpayers who owe a lot of money to the IRS and need some help in that regard.

The IRS Whistleblower Law Office was established by the Tax Relief and Health Care Act of 2006.

KATRINA MADEWELL: Before that, it didn’t exist?

DARRIN T. MISH: There wasn’t a special office. I don’t know why the statute created this office, but now there’s a dedicated office inside the IRS that handles them. What they do is process tips received from individuals who spot tax problems in their workplace while conducting day to day personal business, or anywhere else they might be encountered.

KATRINA MADEWELL: Roughly, what do these people get? It’s a pretty big number. The IRS collected 3.4 billion dollars in revenue.

DARRIN T. MISH: An average award is worth between 15%-30% of total proceeds that the IRS collects. If the IRS moves ahead, based on the information provided. Under the IRS Whistleblower law, these awards will be paid when the amount identified by the whistleblower, including tax penalties and interest, is more than $2 dollars. If the taxpayer is an individual, they must have at least $200,000 in gross income.

When I was reading that, here is what I was thinking. There are a lot of taxpayers that might owe over $2 million that are bankrupt or just barely scraping by. It’s not like earth-shattering news to the IRS that these people exist. What they don’t want is they don’t want to get the tip that the person potentially owe $2 million, $3 million or whatever, and they’re scraping by on $50 grand a year.

KATRINA MADEWELL: They want to make at least $200,000 so they have an ability to repay.

DARRIN T. MISH: Right. The IRS is saying, thanks for the tip, but we’re not going to get anything. My interpretation of what’s going on there is the IRS is saying, we don’t want to pay out the big whistleblower award and then not ever recover anything from the information provided. I can imagine in organized crime, there could be some flipping and whistleblowing going on. if you think about organized crime, by definition, they don’t pay taxes. I’m not advocating this. If you’re participating in an organized crime, I have nothing to do with this, if somebody flips on you.

KATRINA MADEWELL: That was a total attorney disclaimer, in case you didn’t catch that.

DARRIN T. MISH: Some of those guys are kind of scary.

KATRINA MADEWELL: You love how I call you out.

DARRIN T. MISH: Absolutely. So, the IRS whistleblower law office will be responsible for assessing and analyzing incoming tips after determining their degree of credibility, which ahs to be tough. The case will be assigned to the appropriate IRS office for further investigation.

KATRINA MADEWELL: i would think they could look it up and see if they’re paying taxes or not.

DARRIN T. MISH: Well, in a later segment of the show, we’ll have a lot of examples. It could be a person who is running a cash-type business. Let’s call it a bar. a lot of cash running in and out of a bar. Some credit cards too, but a lot of cash. It could be the owner is skimming the cash. I’ve seen it. He’s skimming 25%, 30%, 50%. it could be any business, really, and an employee gets wind of that. The owner is putting the money right in his pocket, it’s not showing up in the cash register totals. Maybe it could be a server who is not getting tipped out on those.

KATRINA MADEWELL: That makes sense.

DARRIN T. MISH: The server is kind of like, “man, that guy is really greedy, that’s not fair.” If you let that build up, eventually what’s maybe going to happen is they call the IRS whistleblower law office and rat them out.

KATRINA MADEWELL: Interesting. I can see why that would be extremely relevant to a business that does a lot of cash.
DARRIN T. MISH: Let’s say it’s a big bar. Let’s say they’re doing around a million a month. There are some places like that.


DARRIN T. MISH: A million a month in revenue could be great, or horrible, it’s hard to say. If your expenses are $975 grand, it’s probably not that great a business.

KATRINA MADEWELL: Are there any limitations on who can get compensated for the IRS whistleblower law?

DARRIN T. MISH: The IRS can pay awards to people who provide specific and credible information to the IRS if the information results in the collection of taxes, penalties, and interest, or other amounts from the non-complaint taxpayer. Here’s what the IRS is saying. They’re looking for solid information. Not an educated guess or unsupported speculation. They’re looking for significant Federal tax issue. They also say this is not the program for resolving personal problems or disputes about a personal relationship.

Interesting, though, I can tell you that spouses are one of the biggest sources for these things.


DARRIN T. MISH: Of course.

KATRINA MADEWELL: So they’re getting a divorce?

DARRIN T. MISH: Think about it. you’re getting a divorce, one spouse is saying that person has always cheated on taxes, I know it. He’s been skimming, or she’s been skimming for years and proverbially drop the dime and the IRS looks into it. I think that would be a relatively credible source. That’s somebody really close to the information.

KATRINA MADEWELL: They should know.

DARRIN T. MISH: The potential issue is, let’s say you’ve been filing joint tax returns with your spouse then you tell the IRS he’s been skimming for years. Uh oh.

KATRINA MADEWELL: Aren’t you involved in that too?

DARRIN T. MISH: If you knew, you might have a problem. You might bet immunity from that; I don’t know.

KATRINA MADEWELL: I don’t think I would do that without an attorney.

DARRIN T. MISH: You would probably need to seek counsel before you decided to do that. In my example, where it was a server, maybe not so much. The server is probably not involved in the illegal activity, sot hat might make sense.

KATRINA MADEWELL: So they’re paying them roughly 15%-20% of what they collect. I imagine it’s after they collect, right? Won’t they pay them money in advance?

DARRIN T. MISH: Let me talk about the rules for getting an award. There are two types of awards. If the taxes, penalties, and other amounts in dispute exceed $2 million, and there are a couple other qualifications, the IRS will pay 15%-30% of the amount collected. Collected is an important word there. It can’t be just assessed. It has to be collected. So the IRS is hedging their bets there too.

KATRINA MADEWELL: They don’t want to pay based on the debt?

DARRIN T. MISH: If they collect the money, then they will give the whistleblower between 15%-30%. I’m not sure how they determine the amount. But it’s 15%-30%. If the case deals with an individual, as we indicated earlier, his/her annual gross income must be more than $200 grand. If it’s somebody doing small stuff and it’s cumulative from years and years, they’re not that interested. If the whistleblower disagrees with the outcome of the claim, he/she can file an appeal to the tax court.

KATRINA MADEWELL: I’ve heard it all.

DARRIN T. MISH: It’s kind of crazy. It’s like, I filed an IRS whistleblower law claim, and I don’t agree with the way the IRS treated me in the claim, so I’m going to go ahead and file an appeal to the tax court and let them sort it out.

KATRINA MADEWELL: I would be interested to know how many times that’s happened.

DARRIN T. MISH: Fascinating. If you’re interested in looking up more information about the IRS Whistleblower law program, you’ll look at Internal Revenue code section 7623-B. We don’t do that a lot on the show. We don’t talk about statutes all that much. But it’s Internal Revenue Code section 7623-B, that’s where the IRS whistleblower law rules are.

KATRINA MADEWELL: So, the people that don’t meet those general thresholds, they don’t make $200 grand a year, they don’t owe more than $2 million taxes, is there anything for those people?

DARRIN T. MISH: They have another program for people that don’t meet the dollar thresholds. The awards for this program are less. The maximum award is 15% up to $10 million. In addition, the awards are discretionary and the informant can not dispute the outcome of the claim in tax court. The rules for those type of cases are found at 7623-A in the Internal Revenue Code. That’s called the Informant Claims program. Some of those cases are a little bit different than the whistleblower cases that we’ve been talking about.

KATRINA MADEWELL: I can’t believe you can appeal that. I think it’s funny.

DARRIN T. MISH: Let’s talk about this for a second, it just popped into my head. I think the IRS is one of the scariest organizations on the planet from this perspective.

KATRINA MADEWELL: Right next to the mob.

DARRIN T. MISH: Not from the perspective of things they do to taxpayers, what I’m talking about is more conceptual. If you’re going to take control of a society or individuals inside this society, you don’t have to imprison them. All you have to do is take their money. If you take an individuals money aware, and it’s all electronic nowadays, it’s all numbers on a screen. If you take their money, they can’t support their family, they can’t eat, they can’t do anything. That would be like being in prison, but not being in prison. That’s what I think is scariest about the IRS and the reason I think they need more and better oversight from Congress and from us as a society at large. If they run amuck, if they’re allowed to run amuck, like I think they were in the last administration, then we’re not really living in a free society anymore.

KATRINA MADEWELL: I have an opinion on that too, and I will share it when we come back. You’re listening to the IRS Solution Attorney show. We’ll be back in just a minute.

(commercial break)

KATRINA MADEWELL: Welcome back; this is the IRS Solution Attorney Show.

DARRIN T. MISH: I’m your host, the IRS Solution Attorney, Darrin T. Mish.

KATRINA MADEWELL: I’m your cohost, Katrina Madewell. We have to come back to where we left off before the break. Let’s recap on that.

DARRIN T. MISH: All I was saying is that I think in a free society, the IRS is one of the scariest potential organizations there is because if a political figure, on either side of the aisle, wanted to control an individual or large segments of the population, they could use the IRS as the instrument to do that. I believe if you cut off somebody’s access to funds, the typical person, the person using the bank account, that has a job or small business. I’m not talking about the guy that does odd jobs on the side for cash and everything he does is cash. That guy is kind of bulletproof, as far as the IRS goes, if he’s willing to break the law. But the average person, small business owner, doctor, attorney, pizza place owner. Anybody like that. The IRS, if they wanted to, they could cut off their source of funds and basically ruin their life. That’s what’s scary to me.

KATRINA MADEWELL: In any other organization, any other non-profit or anything else, they typically will have a board and that board of directors will vote on what decisions are made. if you look at some organizations, this is a smaller scale, but it ties into what you’re saying when you look into an organization like the PTA. The only reason I know this is because I served as a PTA President for a couple of years. I didn’t know what I was doing. I had to go through some training. The PTA has very strict rules that when you are a signer on the account, so like the president, treasurer, you can not also be a school board employee. They do that for a reason.

DARRIN T. MISH: That makes sense.

KATRINA MADEWELL: They don’t want the principals or the people that would have influence or their boss directly influencing which should be an unbiased third party to make the best decisions for the kids.

DARRIN T. MISH: I think it does make sense. It’s the Parent Teacher Association.

KATRINA MADEWELL: Not to be confused with the PTO. PTO’s can have school board employees. On some lower, socioeconomic classes, they will have PTO’s because a lot of involvement will be teachers.

DARRIN T. MISH: Because there aren’t a lot of parents that would be interested in participating.

KATRINA MADEWELL: Or can. They have a lot of double income working families, so that’s a lot of it too. It should be something similar to that. You don’t want to have a political party, one side or the other, get involved, and using the IRS as leverage for political gain.

DARRIN T. MISH: Both sides of the aisle, I don’t care what your political affiliation is. If you’re listening to us and disagreeing saying, no my side should really sock it to them. There will be a change in government, we just saw it. We just saw it swing from very liberal, to less liberal, in my opinion. Kind of wacky at the moment. If you were in support of Barack Obama using the IRS as a weapon, well then you probably ought to be in support of Donald Trump using it as a weapon. Potentially, I’m not saying he is. I’m not even saying that Barack Obama necessarily was.

KATRINA MADEWELL: In general, fair is fair.

DARRIN T. MISH: Theoretically, it’s a frightening prospect. I don’t think the people that I deal with at the IRS on a day in day out basis, do this. I’m just talking about potentially. It could be very scary if the IRS got even more out of hand than I think they are now.

Let’s talk about how to file an IRS whistleblower law claim if you are so inclined.

KATRINA MADEWELL: There might be someone boiling right now, listening, that’s waiting for us to get to this point.

DARRIN T. MISH: Again, if you’re interested in doing this, do not call my office. There are a lot of other people willing to help you do this.

KATRINA MADEWELL: But if you have a tax problem, you can call Darrin at 888-GET-MISH.

DARRIN T. MISH: I represent individual taxpayers who have problems with the IRS. I got plenty of business. If you want to file an IRS whistleblower law claim, you’re going to go to the IRS website and download the form 211. I never heard of this before we did the research for this show. It’s called an Application for Award for Original information. It sounds Orwellian. It sounds like something out of 1984.

KATRINA MADEWELL: It’s kind of a low form number.

DARRIN T. MISH: I’m surprised it’s not form “1”.


DARRIN T. MISH: Then you mail the form 211 to the whistleblower office in Ogden, Utah.

KATRINA MADEWELL: Why does it say whistleblower office – ICE. Isn’t that In Case of Emergency?

DARRIN T. MISH: Ice is now the Immigration and Customs Enforcement. I don’t know why. Probably because if the whistleblower information is good, then they’re going to put the taxpayer on ice.

KATRINA MADEWELL: That’s what they do in Utah.

DARRIN T. MISH: There’s a lot of ice in Utah. Let’s talk about some claims that won’t be processed under the law. If the informant is an employee of the Treasury or is acting in the scope of his official duties as an employee of Federal, State, or Local government, no go. If you work for the government, you’re getting paid,t hat’s part of your job, you should be reporting violations.

The next one is similar. If the individual is required by Federal law or regulation to disclose the information or the individual is precluded by Federal law or regulation from making the disclosure.

KATRINA MADEWELL: Does that apply to attorneys?

DARRIN T. MISH: I’m trying to imagine a scenario. Very theoretically, I guess.

KATRINA MADEWELL: An individual required by Federal Law.

DARRIN T. MISH: Let’s say you’re an FBI agent and you have an informant on an unrelated case and in the course of your duties you determine this informant is not paying taxes. You can’t drop the dime on this guy.

KATRINA MADEWELL: That’s the only example I can think of.

DARRIN T. MISH: If the individual obtained or was furnishing information while acting in his/her official capacity as a member of state body or commission having access to such materials Federal returns, copies, or (inaudible).

KATRINA MADEWELL: So if they had access to the data that someone in the general public might not have, that doesn’t count.

DARRIN T. MISH: All of these are kind of related. If you work for the government, you’re not getting paid. Not through the IRS Whistleblower law program. I think that’s a good decision.

KATRINA MADEWELL: This could be like a file clerk. They could fall under it.

DARRIN T. MISH: The next one is if the individual had access to taxpayer information arising out of contract with the Federal government that forms the basis of the claim. That’s similar.

If the claim is found to have no merit or the claim lacks sufficient specific and credible information. If it has no merit, it has no merit; I don’t need to give you an example. Just someone making stuff up. I’m sure that’s fairly common.

KATRINA MADEWELL: Or maybe there’s not enough information to file the burden ot proof.

DARRIN T. MISH: Could be. I see John Smith driving around in that fancy convertible; I don’t think he’s paying his taxes.

KATRINA MADEWELL: He must be skimming taxes.

DARRIN T. MISH: Well, that’s not going to be specific enough or credible enough.

KATRINA MADEWELL: You can submit it anonymously, but you’re not going to get paid, right?

DARRIN T. MISH: You can submit the claim anonymously or under an alias, but you’re not going to get paid under taht 7623-B, the 15%-30% of $2 million or more. If you’re going for big money, you can’t submit it anonymously, and you can’t use an alias.

KATRINA MADEWELL: That would be like going after the mob. I don’t know that I would want to turn my name in.

DARRIN T. MISH: The government is going to tell you, don’t worry we’ll protect you. nobody will find out. Except there are leaks in the news every day now of National security information.

KATRINA MADEWELL: They’ll never find you, some little whistleblower.

DARRIN T. MISH: If you dropped the dime on Tony. Tony has a place up in New York.

If the claim was filed by a person other than an individual. So like a corporation or a partnership. Not getting paid under 7623-B, not getting paid the big money at least. If the alleged non-compliant taxpayer is an individual whose gross income is below $200,000, then you’re not going to get paid under the big money program.

KATRINA MADEWELL: There are claims that they just flat-out refuse to process, right?

DARRIN T. MISH: I’m sure. I can’t say I’m sure, but I would guess that the number of unprocessable claims is certainly a significant number.

Let’s talk about examples of claims that won’t be processed under the 7623-A, the one where they get to decide the amount of your award.

KATRINA MADEWELL: Don’t forget, you can appeal it.

DARRIN T. MISH: Not under 7623-A. Under 7623-A, you’re out of luck. They decide what you’re going to get and that’s it.


DARRIN T. MISH: If the individual is an employee of the Department of Treasury, etc. If you’re a government works for the government, you’re not getting paid. An individual is required by law to disclose and can’t disclose, you’re not getting paid. If the individual was acting in their official capacity as a government employee, you’re not getting paid. If the individual had access to the taxpayer information arising out of a contract with the Federal government, you’re not getting paid. If there’s no merit or the claim lacks specific and credible information, you’re not getting paid. Looks like you can’t file one anonymously under either section of the law.

KATRINA MADEWELL: Looks like they don’t want anonymous.

DARRIN T. MISH: the more I think about that, the more I think that’s a good policy.

KATRINA MADEWELL: They would probably get flooded.

DARRIN T. MISH: Yeah, it would be like, I don’t like this guy. You also can’t file…it’s pretty much the same rules under both sections. Here’s one of the things that came to mind in looking at you as we’re doing this show since you’re so involved in real estate and mortgages. What if a taxpayer files for a mortgage and they file one of these phony baloney tax returns or they give the mortgage people phony tax return reflecting a bunch more income.

KATRINA MADEWELL: As of several years back, it used to be they only did this at Miami Dade and Broward county, but now it’s statewide. Here in Florida, we’re still considered a high-fraud state. Sometimes this will hold up closings. You can give information, but they’re going to file the 4506-T with the IRS to get the transcripts. They’re going to make sure it matches what you gave them. I have seen times where it’s only off a teeny bit. It was just some little tiny shift and they break out. Like the borrower is trying to commit fraud.

DARRIN T. MISH: That’s not the point I was trying to make. What if the person processing the mortgage notices irregularities in the tax returns and determines that they think there’s some IRS fraud going on, unreported income or stuff like that. And they drop the dime on them.

KATRINA MADEWELL: I don’t think they would. The only reason I’m saying that is actually doing that job at some point in time, and I had three mortgage companies. It’s just not what you’re looking for. There are so many other details you’re paying attention to.

DARRIN T. MISH: As an example, I don’t think that person would be precluded under these rules from making that sort of a claim. There are no privileges, there’s no government employ. There’s probably some kind of confidentiality pledge, but not with breaking the law.

KATRINA MADEWELL: I think it would be a conflict of interest. Like you, if you represent them in some capacity or another, it’s just off.

DARRIN T. MISH: If you’re represented by an attorney and the attorney finds out there’s wrongdoing or potential crimes you’ve committed, the attorney is precluded by law from reporting that to anyone. if you tell the attorney, hey I’m going to go and kill somebody and then the attorney must report it in advance because we can’t be part of that crime.

KATRINA MADEWELL: We have to take a break. We’ll be back in a minute.

(commercial break)

DARRIN T. MISH: Welcome back to the IRS Solution Attorney Show. I am your host the IRS Solution Attorney, Darrin T. Mish. Today we’re talking about the IRS Whistleblower law program and can it be worth any money to you. I’ve made this disclaimer a few times so far on this show. I am not representing taxpayers who are interested in whistleblower claims, I have no problem with people who do, it’s just not part of my practice. This show is just a public service announcement. It’s just about getting the information out there.

KATRINA MADEWELL: It’s interesting you brought up the point of what if a mortgage person notices? They’re heavily regulated as well. The privacy policy covers so much stuff.

DARRIN T. MISH: I wasn’t thinking so much of the broker, the professional handling of the file. You know the people that push the paper around and organize information.

KATRINA MADEWELL: The processors look at it a little bit. I would say if anyone was to catch it, it would be the underwriter. That’s the person you never meet behind the scenes.

DARRIN T. MISH: That’s the bad guy.

KATRINA MADEWELL: It could be. If they deny your loan, they’re the bad guy.

DARRIN T. MISH: If they approve it, they’re the good guy.

KATRINA MADEWELL: There’s a reason you’re not allowed to talk to those guys. They have strict contracts. They’d have your head on a plate if you were to develop that information.

DARRIN T. MISH: I didn’t realize you couldn’t talk to the underwriter.

KATRINA MADEWELL: Nope, not allowed to.

DARRIN T. MISH: I wanted to talk about full disclosure with regard to the IRS whistleblower law program. If the whistleblower withholds available information, the whistleblower bears the risk that the withheld information may not be considered by the whistleblower office and making any awarded determination. So, it’s kind of like, withhold information from us at your own risk. You hear the saying that information withheld is almost like lying. there’s a better way to say that. Basically, that’s what they’re trying to get at here.

KATRINA MADEWELL: It’s not full disclosure.

DARRIN T. MISH: If documents or supporting evidence are known to whistleblower but not in his or her possession, the whistleblower should describe these documents and identify the location to the best of his or her ability.

KATRINA MADEWELL: What is that? A housekeeper?

DARRIN T. MISH: Back to our guy, the bar owner who’s doing a million a month in cash, he probably has two sets of books.

KATRINA MADEWELL: Yeah, that guy.

DARRIN T. MISH: There’s the official set that the bookkeeper does and there’s a paper ledger someplace that are really his and he keeps that in the safe on the left-hand side under his desk. I’m just surmising that’s the kind of information they’re looking for. It also says that except in the most unusual cases involving boxes of data, the whistleblower should include the evidence with the initial submission. Contact the IRS whistleblower law office for guidance if there’s a question on what to submit.

KATRINA MADEWELL: In this day and age with cell phones. Snap, snap.

DARRIN T. MISH: I think it says except for the most unusual cases involving boxes, which I don’t think are probably all that unusual. There probably are lots of cases with boxes and boxes of data. I don’t even know what that means in this case. They want the paperwork with initialed submission.

KATRINA MADEWELL: The next one is funny.

DARRIN T. MISH: Under no circumstance does the IRS accept or condone illegal actions taken to secure documents or supporting evidence. So you can’t steal that second set of books.

KATRINA MADEWELL: Like they would give it to you.

DARRIN T. MISH: You probably can’t photograph it, either. This is a minefield of legal problems here. This is another reason I don’t handle these cases. If the potential client called me and said he works for a bar and they have two sets of books…

KATRINA MADEWELL: The lines are really hazy. They kind of overlap a little bit.

DARRIN T. MISH: It’s too sketchy for me. There’s no specific format that’s required. An index to exhibits, particularly when they’re voluminous is always helpful. So the waitress at our bar is going to find the second set of books, not steal them, somehow get permission to photograph them, and then she’s going to have the organizational know-how to organize these and letter them as exhibits to make the IRS’s case. It probably does happen in defense spending cases and healthcare and those types of things.

KATRINA MADEWELL: Not your layperson, though.

DARRIN T. MISH: Let’s talk about some big award sums. In 2009, the pharmaceutical company, Pfizer, in September of 2009, a group of 10 former Pfizer employees, including original whistleblower, were awarded $102 million for having exposed the illegal promotion of the arthritis drug, Bextra, according to the American Lawyer. That’s big money. $102 million divided by 10 people. $10 million each. This is why the IRS just a second ago said it doesn’t condone illegal behavior. There are plenty of people that would take risks and do illegal things to get paid $10 million. Lots and lots of people.

September 2012, UBS, $104 million. The IRS awards to Bradley Birkenfeld and they made him the most richly awarded whistleblower to date. However, Birkenfeld paid a price. He spent 40 months in prison for his own complicity in the tax fraud. He said his former employer UBS had perpetrated. The good news is, you got $104 million. The bad news is, he spent 40 months in prison. Not a bad trade off. 40 months, divided by $104 million. He got PAID while he was in prison.

The next one is HCA. Wasn’t the governor, wasn’t Rick Scott involved with HCA? I don’t think he had anything to do with this.


DARRIN T. MISH: $100 million in the year 2000, two whistleblowers shared the award after they told the FBI that the healthcare provider was regularly overbilling Medicare. Their tips led to government raids of 35 HCA locations in 1997. HCA ended up paying a landmark fine for those violations.

You can see these IRS whistleblower law cases are not so much about individual people, the bar owner is probably not a big fish. We’re talking big corporations.

KATRINA MADEWELL: There’s a common theme here. USB, Pfizer, Smith-Kline…

DARRIN T. MISH: There’s a lot of healthcare going on. Let’s talk about Bank of America. $25 million in March of 2012. Bank of America agreed to pay fines to settle a Federal probe of alleged underwriting and mortgage fraud involving, guess who, Countrywide.

KATRINA MADEWELL: I have to stick up for Countrywide here. I’ve been around for a long time. I was around before any of this crazy stuff went on, and without a whole big story, they get a deal done in four hours. By legit underwriting guidelines.

DARRIN T. MISH: Yeah, they got a deal done for one of my clients one time, and they ignored a Federal tax lien, which was fascinating.

KATRINA MADEWELL: They went down the wrong hole.

DARRIN T. MISH: Those guys were cowboys. I don’t have a problem with them necessarily. Bank of America, Whistleblower Kyle Lego, he dropped the dime on them, he was awarded $14.5 million in that case.

KATRINA MADEWELL: You know a lot of people like that guy. A lot of people don’t like this particular bank that we’re talking about. They’re not very well liked.

DARRIN T. MISH: There’s a lot of branches and they’re really big.

KATRINA MADEWELL: They are. They got mixed up in a lot of stuff with Countrywide and some of those other lenders. They bought a lot of those second loans, and they went kerplop.

DARRIN T. MISH: Do we have time for one more?

KATRINA MADEWELL: Like a second.

DARRIN T. MISH: Tenet is the company, they ended up owing, the award was $8.1 million. Two whistleblowers for having told the FBI that they believe physicians at a hospital in Redding, CA, were performing unnecessary cardiac procedures and they shared an award of $8.1 million. Tenet had to pay $54 million.

KATRINA MADEWELL: We’re out of time, Darrin. We don’t have time for your train wreck.

DARRIN T. MISH: Oh, man, how did that happen?

KATRINA MADEWELL: You’re listening to the IRS Solution Attorney show.

DARRIN T. MISH: For today, we’re out.

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