| WASHINGTON, April 10
WASHINGTON, April 10 The U.S. Internal Revenue
Service is missing a chance to raise a lot more revenue by
turning a cold shoulder to people offering up the inside scoop
on tax dodgers, lawyers who represent such whistleblowers said
At a hearing about new rules for the IRS whistleblower
program, officials got an earful of advice from several lawyers
who make money representing informants and who, in turn, want to
make more of it for themselves and their clients.
"The IRS needs to do a much better job of attracting
whistleblowers into the program," said Erica Brady, of The
Ferraro Law Firm, which has a tax whistleblower practice.
There is an impression among some lawyers and clients that
whistleblowers "are just not welcome" at the IRS. She said,
"These rules really do very little to dispel that impression."
Criticism of the tax-collection agency's treatment of
whistleblowers has been building for months, led by Senator
Chuck Grassley, who has long argued that smarter handling of
whistleblowers could bring in substantial tax revenues at a time
when the federal government is wrestling with huge deficits.
The Iowa Republican led a 2006 overhaul of the IRS program.
Seven years later, the IRS is still working on implementing new
rules. Those discussed at the hearing had to do with submitting
information and setting rewards for informants.
The next step for the agency is to consider the lawyers'
comments, many of them substantive, and decide what to do, said
Stephen Whitlock, director of the IRS Whistleblower Office, in a
brief interview after the hearing.
"It's too soon to say" how long that will take, he said.
BIGGER REWARDS PROMISED
Under the 2006 rules, whistleblowers with valuable tips can
get up to 30 percent of additional tax collections resulting
from disputes worth $2 million or more. Previously, rewards were
made at the IRS's discretion and were small.
Since 2006, only about 10 rewards have been made under the
revamped program, whistleblower attorneys have estimated.
The only one that the IRS has publicly acknowledged was
September's record-setting, $104-million payment to Bradley
Birkenfeld. A former banker at Swiss-based UBS AG,
Birkenfeld told the IRS about how he helped former clients stash
hundreds of millions of dollars in secret Swiss accounts.
The agency has said that hundreds of informants are actively
involved in the program, but new whistleblower tips to the IRS
fell to 332 last year from a 2009 high of 472 at a time when
whistleblowing tips at other agencies have been on the rise.
"The whistleblower office needs to be much more open and
much more welcoming to whistleblowers in the future," said Scott
Oswald, managing principal of The Employment Law Group, which
For instance, after it gets tips, the agency needs to inform
the whistleblowers more promptly about their cases' status, said
Bryan Skarlatos, a tax lawyer at the firm of Kostelanetz & Fink
who represents both taxpayers and whistleblowers.
"A process for getting information to the whistleblowers
sooner" is needed, said Skarlatos, who generally praised the IRS
for balancing the rights of all involved in the new rules.
The question of tax informants being left in the dark,
sometimes for years, by the IRS will come to a head on June 18,
when the U.S. Tax Court has a hearing in the case of Joe
Insinga, who blew the whistle on his former employer, Rabobank
Group, in 2007.
Today, Insinga still does not know whether or not he will
get a reward, or even where his case stands with the IRS. He
asked the Tax Court - where most people go who want to challenge
the IRS - to intervene. Last month it decided it would.
At the June 18 hearing, the court was expected to get from
the agency an explanation of its handling of the Insinga case,
which could have wide implications if it leads to the IRS being
generally more forthcoming with whistleblowers.