Excluding FBAR Violations from IRS Whistleblower Award Calculations “Negatively Affected Whistleblowers’ Willingness” to Report Tax Fraud
The Bipartisan Budget Act of 2018, passed in February required the Internal Revenue Service (IRS) to include penalties for Report of Foreign Bank and Financial Accounts (FBAR) violations in calculating IRS whistleblower awards. Prior to this statutory change being signed into law, FBAR violations were not included in the calculation of IRS whistleblower awards.
The Government Accountability Office (GAO) issued a report this week that reviewed the impact of the former exclusion for FBAR and other non-Title 26 collections from whistleblower awards. The GAO found that whistleblower lawyers limited the number of clients alleging FBAR noncompliance they were willing to represent when such collections were excluded from IRS whistleblower reward determinations. Whistleblower attorneys also reported that many would-be whistleblowers would not come forward to report tax fraud due to the exclusion of criminal fines from collected proceeds. This is significant because the “estimated value of undisclosed offshore accounts may be in the tens of billions of dollars,” the report stated.
The GAO report concludes that for the IRS Whistleblower Program to be successful, whistleblowers need to have confidence in the program’s outcomes especially qui tam whistleblower awards paid when the Agency uses their information.
“I am pleased that the Director of the Whistleblower Office, Lee Martin, provided the necessary leadership to ensure that the new law was implemented quickly and with minimum bumps. The new law is a win for whistleblowers and is also a win for the IRS in its efforts to go after big time tax cheats,” Stephen Kohn of the qui tam law firm of Kohn, Kohn and Colapinto stated.
“The GAO report confirms that Congress did the right thing by clarifying that tax whistleblowers should be awarded for FBAR payments made by millionaires and billionaires seeking to hide their money in illegal offshore accounts. The new law is already encouraging more whistleblowers to come forward,” said Dean Zerbe of the law firm of Zerbe, Miller, Fingeret, Frank & Jadav, LP .
Stephen Kohn and Dean Zerbe represent jointly a number of tax whistleblowers – including Brad Birkenfeld, the UBS whistleblower who received an award of $104 million dollars from the IRS in 2012. In addition, they successfully represented a whistleblower in the landmark Tax Court case of Whistleblower 21276-13W v. IRS (147 TC 121 – 2016) which resulted in a major win for whistleblowers with the definition of “collected proceeds” for whistleblower awards. Stephen Kohn also serves pro bono as executive director of the National Whistleblower Center (NWC) and Dean Zerbe, is a senior policy analyst to the NWC.