Forbes.com recently reported IRS Reports Ten-Fold Increase in Tax Whistleblower Awards: $312 Million in the 2018 Fiscal Year, which amounted to over $1.441 billion in taxes, penalties and interest that were recovered. It’s interesting that Dean Zerbe mentioned “For all the talk that fills Washington about making sure people pay their fair share…” all goes back to a previous post I wrote, in which many tax payers have made this their mantra and although it’s an open-ended statement because it’s unclear as to what that amount actually is.
Now this doesn’t mean that everyone is going to rush out and become a whistleblower to the IRS because there’s a significant amount of denials when the information is submitted because there’s a rigorous process someone needs to go through in order to get to the point of being rewarded for their collection efforts. As well there’s many issues of retaliation that have occurred on behalf of the company target that are sprouting up burgeoning law practices to fight for the protection of the whistleblowers and it’s working in their favor. This is why we have the False Claims Act which is geared towards entities that defraud the federal government, the Dodd-Frank Act which focuses on protecting consumers against abuses related to credit cards, mortgages, or other financial products.
The Whistleblowers Act of 2017 was designed specifically for tax dodgers and included in the Tax Protection Act of 2016. From this, it’s helped propel the increase in awards and tax collections because it’s ultimately how the IRS collects its paycheck for the government to help support the services that everyone who lives in America sometimes takes for granted, and it’s vital that we remind ourselves of why we need to pay taxes.
The Census Bureau’s Annual Survey of Entrepreneurs have estimated that in 2016, businesses with less than 0-19 employees accounted for 89% which is a significant amount, allowing a much bigger target for challenging IRS audits and general tax reporting. Although there’s no statistical data on how many businesses are behind in filing their tax returns, there’s no time limit on collecting these taxes for having not filed your returns.
What does that mean for you and how does this all tie together? There’s the opportunity of being charged with a crime, either from tax evasion or failing to file tax returns. There’s also the challenge of fighting what may be misunderstood deductions or receiving advice from well-meaning friends or family to something you read on the internet that wasn’t from the IRS web site as legitimate. People bet the odds that they won’t be caught, and a lot of people likely will never be challenged. I met someone some years ago who hadn’t filed in 22 years, lived receiving only 1099s and W2s during this time, and their excuse was that the IRS had taken monies owed to them from a bank account without their knowledge. Since then they never had a bank account again because it was their distrust on why they chose to live in their current state.
They consulted me after they started receiving notices from the IRS, and I explained to them the safest option was physically meeting with a representative to determine what the best course of action after due diligence preparation as to why they failed to file after so many years. I explained to them the amounts would be significant, penalties and interest would be significant, and an Offer in Compromise could potentially become a resolution to the problem.
What happened to them? They chose to ignore it and we parted ways. Ben Franklin said “…in this world nothing can be said to be certain, except death and taxes” back in 1789. After 230 years, it’s not going to be changing any time soon.
Dwayne J. Briscoe