Corporate Tax Fraud and The Unique Position of Accountants

Accountants as Corporate and Business Tax Whistleblowers

Accountants are in a unique position to make millions of dollars.

Accountants are making the IRS Tax Whistleblower Reward Program on the “road to success” for the IRS.  To the surprise of many within the IRS, the majority of cases accepted under the Tax Whistleblower Reward Program since its inception in December 2006 includes the information from one group – Accountants.

Initially, accountants may falsely assume that the Tax Whistleblower Reward Program is to catch them in a mistake.  They assume that an employee (e.g., a secretary, para-professional, or junior accountant) can turn them (or the accounting firm) in for an error in the preparation of a client's payroll, examination of financial statements, preparation of a tax return, etc.  They wrongly assume that if they make a mistake in the books or records the case qualifies for the Tax Whistleblower Reward Program. 

Nothing could be further from the truth.  First of all, the program is limited to those situations where the underpayment is at least $2,000,000 in tax, penalty, and interest, thereby eliminating nearly all cases involving accounting errors.  The Program clearly will keep the accounting profession honest for which it already has such reputation.  However, to the extent that there are accountants who are involved in tax fraud, tax evasion or ignore, misapply, or bend the rules (e.g., of the Internal Revenue Code) in an excessive manner, then, yes, the Program may apply to the dishonest accountant.  But having talked to numerous accountants, it appears that this Program is good for the profession as it is may ultimately eliminate the dishonest competitor. 
A corporate tax whistleblower looking at the numbers.
Several examples of when an accountant is in a position to assert a claim or share in the reward from the Tax Whistleblower Reward Program are as follows:

Accountants as employees (current or former)

Many of the cases accepted under the Tax Whistleblower Reward Program are based on information received from accountants who are current or former employees of a taxpayer who is underreporting or underpaying tax.  Such accountants range from low-level employees to CFOs in charge of entire departments of large companies.  With the help of our law firm, an accountant can refer his current or former employer under the Tax Whistleblower Reward Program for underreporting and underpaying tax, of which the accountant is aware, and obtain a substantial reward.

Accountants as advisors

Accountants are in the unique position of seeing and reviewing many types of tax situations.  Accountants are often asked to review tax shelters about which they may disagree with the purported benefits.  Instead of referring clients to the tax shelter promoter, accountants can refer the tax shelter promoter under the Tax Whistleblower Reward Program, with assistance from our law firm.  Having seen and reviewed such information, an accountant may be in a unique position to obtain a substantial reward.

Accountants as confidants

An accountant, whose client has knowledge of the underpayment or underreporting of tax by another taxpayer, may receive such information during the course of performing services for the client.  Many clients confide such information in or seek advice from their trusted tax advisor.  The accountant is then in a unique position to work jointly with their client in engaging our law firm and submitting a claim under the Tax Whistleblower Reward Program.  The accountant can benefit by being a joint whistleblower with his client or by being engaged by our law firm to assist in gathering facts, performing tax research, and preparing a case for submission.  The accountant is in a position to benefit from a reward under the Tax Whistleblower Reward Program.

Accountants frequently become aware of aggressive tax positions in the ordinary course of business and from information that clients have confided in them.  Some accountants stand to make millions of dollars under the Tax Whistleblower Reward Program.  However, there are four areas of concern they should consider and carefully discuss with a qualified attorney experienced in the Tax Whistleblower Reward Program:

  1. Rules of Ethics – Client Confidentiality
  2. Accountant/Client Privilege
  3. Theft of Property – Removal of Documents
  4. Limitations on Informant Contacts: Current Employees and Taxpayer Representatives (Feb. 27, 2008)
Anyone can report corporate or business tax fraud and earn a reward.

A tax bill as seen by those who report business tax fraud

Any employee (current or former) who has "credible and specific" information of at least $2 million in unpaid taxes qualifies under the Tax Whistleblower Reward Program.  If you have information of a taxpayer underpaying taxes, contact us today.