One of the happier problems for a tax whistleblower is turning to think about the percentage they may receive as an award from the IRS. Under the statute – 26 USC 7623(b)(1) – a tax whistleblower may receive 15 – 30% of the collected proceeds. For tax whistleblowers the challenge is how do they get their award closer to 30%? A recent Tax Court case: Luu v. CIR TC Memo. 2022-126 (2022) provides some useful guidance and builds on what I’ve found in practice.
Getting A Higher Percentage – Let’s Start At The Very Beginning
Before turning to Luu, a reminder of the basics when it comes to award percentages for tax whistleblowers. From what I’ve seen working with my clients who have received awards over the years, the IRS Whistleblower Office (WBO) in general tries in good faith to follow the relevant Treasury Regulations (301.7623-4) in making award percentage determinations. The difficulty is that the IRS starts you at 15% and you have to build the case for a higher award by meeting one or more of the eight positive factors cited in the regulations and avoiding any negative factors that would knock your percentage back down (but not below the statutory floor of 15%).
In short, the eight positive factors for an increase in the award percentage that are cited in the regulations are rough and ready looking at how much did the whistleblower make the IRS’s work easier – identifying, documenting (essentially putting the issue on a T-ball) the tax issue – vs. how much did the IRS...
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