A Whistleblower Reported My Company to the IRS—What Now?

The Internal Revenue Service (IRS) is one of a handful of federal agencies that have whistleblower programs. Under the IRS’ Whistleblower Program, whistleblowers are entitled to strict confidentiality, and they are also entitled to financial rewards if they help the agency pursue a successful enforcement action. As a result, many companies find themselves facing IRS scrutiny as a result of whistleblower complaints. If a whistleblower has reported your company to the IRS, what do you need to know? New Jersey tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group, explains.

Whistleblowers Can (and Do) Report All Types of Tax Evasion and Tax Fraud

The first thing you need to know is that whistleblowers can (and do) report all types of tax evasion and tax fraud. From underreporting taxable income to overstating payroll and other expenses, companies can face IRS scrutiny as a result of all types of whistleblower complaints. In addition to violations of the Internal Revenue Code (IRC), whistleblowers can report violations of the Bank Secrecy Act (BSA), Foreign Account Tax Compliance Act (FATCA) and other federal laws as well, and whistleblower complaints can lead to either civil or criminal scrutiny.

With this in mind, when facing an IRS audit or investigation as the result of a whistleblower complaint, one of the first steps is to assess the legal risks involved. Civil inquiries can lead to liability for back taxes, interest, and various types of IRS-imposed penalties. Criminal investigations can result in both financial liability and prison time for the individuals implicated in the whistleblower’s complaint. In both types of cases, a tailored defense strategy is essential, as avoiding unnecessary penalties involves raising questions about the specific allegations at hand.

Companies Targeted in Whistleblower Complaints Need to Make an Informed Decision About Whether to Seek a Settlement

While companies will have strong defenses to whistleblowers’ allegations in many cases, in others, targeting a settlement with the IRS may be necessary. Companies can settle both civil and criminal allegations, and while there are no guarantees, the IRS will often be willing to settle in the interests of certainty, finality, and efficiency.

With that said, companies should not settle with the IRS unless it is necessary to do so. Even when companies have underreported or underpaid their federal tax liability (or committed other statutory violations), they will often have defenses available. At the very least, the IRS must be able to prove the allegations at issue, and if the IRS cannot gather the evidence it needs to substantiate civil or criminal charges, then further enforcement action is unwarranted.

Schedule a Confidential Consultation with New Jersey Tax Lawyer Kevin E. Thorn

Has a whistleblower reported your company to the IRS? If so, we can help, but it is important that you contact us promptly. To schedule a confidential consultation with New Jersey tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group, call us at 201-842-7696 or contact us confidentially online today.