Monday, December 3, 2012

Whistleblowers and FBAR Penalties (12/3/12)

The IRS has determined that the whistleblower award provided in 7623, here, does not allow awards for information leading to FBAR penalties.  See PMTA 2012-10 (April 23,2012), here.  Practitioners have questioned the propriety and the wisdom of  that interpretation.  See e.g., a National Whistleblower Center tome, dated 11/5/12, here.

The issue seems to turn upon whether the scope of Section 7623 covers collections related to non-tax matters administered by the IRS.  I will not  get into the merits because the  items above do that adequately.

I will note that this possibility should give at least the bigger players in the offshore evasion game some concern.  Even if Section 7623 were not to cover FBAR penalties, it would cover any of the related penalties (such as the 5471 penalty and the 3520 penalties).  And, if the IRS were ever to impose an "in-lieu of" penalty instead of the FBAR penalty, that penalty would be subject to award.  I know that the only "in lieu of" penalties on the table now are the OVDI /  OVDP penalties where the taxpayer voluntary outs himself before the IRS knows about the taxpayer's offshore antics.  But, it seems to me that the IRS could offer the whistleblown taxpayer an in lieu of penalty instead of an FBAR penalty in order to have a basis for a whistleblower award.  Keep in mind that, at least for the 7623(b) award, over $2 million has to be involved, so that this opportunity to pay an award could generate some good leads and revenue for the IRS.

1 comment:

  1. The IRS Whistleblower program only pays 7623(b) awards to convicted felons and those who have political contacts that will put pressure upon the "sitting" Commissioner whose "tireless prodding" for publicity is legendary.

    FBAR IRS whistleblowers are getting screwed. That is plain and simple. That is of course unless they are nabbed by US Customs smuggling diamonds in a toothpaste tube into the U.S.


Please make sure that your comment is relevant to the blog entry. For those regular commenters on the blog who otherwise do not want to identify by name, readers would find it helpful if you would choose a unique anonymous indentifier other than just Anonymous. This will help readers identify other comments from a trusted source, so to speak.