Whistleblower Risks
International Tax Whistleblower Representation
The decision to become an IRS whistleblower can carry serious consequences and should be taken only after careful consideration of potential risks. Those risks can include an impact on the whistleblower’s career, potential civil liability for any improper or illegal conduct associated with whistleblowing activities, and potential criminal liability.
Civil Tax Liability
Any potential tax liability to the whistleblower for the tax underpayment that is being reported must be assessed. There should also be a review of the whistleblower’s status for tax liability unrelated to the whistleblower claim. The IRS will not pay a whistleblower reward until all outstanding tax claims against the whistleblower have been satisfied.
If the IRS determines that the whistleblower has a tax liability, it could choose to pursue a tax claim against the whistleblower without pursuing the whistleblower’s claim.
The whistleblower should also review with counsel the manner in which any documents in support of the claim were obtained. In certain instances, a whistleblower could be subject to a claim for civil liability by the taxpayer if the whistleblower illegally obtained documents to support the claim.
Criminal Tax Liability
If the whistleblower participated in a criminal tax fraud scheme that is being reported, the whistleblower could face criminal prosecution as a result of the fraud that is reported. Any potential criminal exposure should be thoroughly evaluated before submitted.
Recent high profile whistleblowers have been sentenced to prison rather than obtaining a reward because of their involvement in the scheme in which they blew the whistle. It is of paramount importance that you select a firm experienced in criminal tax prosecution and criminal defense if there is any issue as to your potential criminal liability.
K&M employs both a former federal tax prosecutor and a former IRS Revenue Agent, giving us the knowledge and experience necessary to provide you with sound advice regarding any potential criminal liability you may face.
Breach of Fiduciary Duty Claims
If you are a lawyer or accountant, the submission of your whistleblower claim may violate certain ethical duties you owe to the taxpayer. In order to safeguard the future of your career, it is crucial that your whistleblower attorney carefully analyze this matter before advising you on whether to proceed with your claim.
This analysis should include whether any attorney-client privilege or accountant-client privilege applies to the information submitted to the Whistleblower’s Office and whether any exception to the privilege applies to the information submitted. The IRS Whistleblower Office has set forth specific procedures addressing the submission of potential privileged information. Without obtaining proper advice on this matter, you may place your law or public accounting license in jeopardy.
Internal Revenue Code Violations
There are also specific sections of the Internal Revenue Code that address the propriety of disclosure of information by tax practitioners. I.R.C. section 7525, enacted in 1998, governs the nature of information considered to be privileged between federally authorized tax practitioners and their clients. Communications related to tax advice between a client and his tax adviser are protected when they would be considered privileged information between the taxpayer and his attorney.
I.R.C. section 7216 makes it a misdemeanor for a tax practitioner to “knowingly or recklessly” disclose information provided in connection with the preparation of tax returns, or to use this information for any other purpose.
These provisions are constantly evolving as the courts and the IRS handle a growing number of whistleblower cases. Therefore, it is important that you consult an experienced tax whistleblower attorney who is aware of the current interpretations of these provisions as well as their legal ramifications.
If you have knowledge of tax underpayment totaling more than $2 million, please contact our tax whistleblower attorneys to ensure that your interests are protected before moving forward with your claim. Kenney & McCafferty will consult with you about your case, without obligation. All communications with Kenney & McCafferty attorneys regarding your case are confidential and protected by attorney-client privilege.
