Serial Whistleblower Can’t Hide His Identity, Tax Court Says

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Ken Berry
Columnist
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The IRS rewards “whistleblowers” who provide valuable information to the agency about tax cheats. However, as evidenced by a new US Tax Court case, Whistleblower 14377-16W v. Commissioner, 148 TC No. 25, you can’t hide behind a cloak of anonymity, barring unusual circumstances. The public has a right to know who you are.

Under its whistleblower program, the IRS has discretion to pay out awards to whistleblowers in sums it considers necessary to help bring tax evaders to justice.

The IRS recently expanded the program to entice more individuals to come forward. Currently, a whistleblower award must equal at least 15 percent, but no more than 30 percent, of the amount collected in the investigation. The program generally applies when taxes, penalties, and interest exceed $2 million or, if the taxpayer is an individual, the accused’s gross income exceeds $200,000.

Generally, the identity of a whistleblower isn’t hidden under the Tax Court’s rules and procedures, although you can move to have the court protect your anonymity. But you must establish sufficient grounds to obtain this special protection.

In Whistleblower 14377-16W, a “serial whistleblower” failed to convince the court.

Key facts: Mr. Whistleblower, a retired CPA who describes himself as an “analyst of financial institutions,” moved to proceed anonymously regarding his claim that a corporate taxpayer evaded paying nearly $100 million in taxes. He feared that if his identity were disclosed, he would suffer both economic and personal harm. Mr. Whistleblower had learned of the corporate taxpayer’s alleged tax abuse from public sources, such as US Securities and Exchange Commission Forms 10-K.

Mr. Whistleblower had a total of 11 cases pending before the Tax Court. They involved 21 whistleblower claims and as many as 50 separate taxpayers. He also had four cases involving six taxpayers pending before the IRS.

Based on the facts presented in the case, the Tax Court dismissed the motion. While it recognized the general inclination to protect confidential informants, the court determined that the public’s interest in identifying multiple claims by a whistleblower outweighed his request for anonymity. 

Previously, the court had addressed a whistleblower’s motion to proceed anonymously in only five cases. Unlike the claimants in three of the cases, Mr. Whistleblower offered no plausible proof that he had been or might be threatened physically. Nor did he claim an employee relationship, which could have been severely damaged by his allegations.

Furthermore, unlike the individuals in the other five cases, Mr. Whistleblower had not identified someone who, upon learning his identity, would have the power to act against him. Although he might suffer some embarrassment or harsh language, the court found that his fears of marital discord, alienation of unnamed business partners, and retribution from unnamed political figures to be speculative.

Finally, the Tax Court also noted that Mr. Whistleblower had derived the information from sources available to the general public. It appears that a “cottage industry” has sprung up around searching through public documents in hopes of securing a hefty award from the IRS. The Tax Court said if it merely rubber-stamps protections for such serial whistleblowers, it would open the floodgates and its dockets would overflow.

Mr. Whistleblower’s particular circumstances – including a lack of employment and no real connection to the accused taxpayer – suggest that his argument doesn’t deserve further merit. Accordingly, the motion was denied.

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