New York continued to crack down on tax cheats under its strengthened False Claims Act (FCA), awarding a whistleblower more than $300,000 for reporting an out-of-state retailer’s failure to collect sales tax on high-end appliances it delivered to New York customers.
A U.S. Tax Court judge on Tuesday allowed three whistleblowers to hide their identities in court for reasons that ranged from death threats to a fear of professional ostracism.
The rulings by Judge Diane L. Kroupa appear to be the the first decisions publicly reached under the Tax Court’s Rule 345, which in 2012 established a formal procedure for tax whistleblowers to request anonymity.
What can whistleblowers do when the IRS Whistleblower Office denies them an award for helping the government to recover money from a suspected tax cheat?
They can do what Albert G. Hill, III, did — challenge the denial in tax court.
But such challenges are difficult without access to information that the IRS used to deny the award in its often-opaque decision process. In Mr. Hill’s case, the IRS took a common — yet extreme — position on taxpayer confidentiality, refusing to allow Mr. Hill to review documents from the administrative file of the taxpayer he had targeted.
This week the U.S. Tax Court ordered the IRS to hand over the documents under strict conditions — and, in doing so, provided a sensible model for how such appeals should be handled.
In an unusually blunt opinion, the U.S. Tax Court rebuked the Internal Revenue Service for continuing to fight award claims made by two anonymous whistleblowers — even as the agency was reopening the same claims in a related investigation.
In a dismissal order issued on May 10, 2013, Judge Maurice Foley slammed the IRS for providing “incomplete, misleading, and possibly inaccurate information” in the case.
President Obama’s proposed budget for fiscal 2014 includes good news for whistleblowers: Under his plan, the law finally would protect people who report tax cheats to the U.S. Internal Revenue Service (IRS).
A well-known New York City tailor pled guilty to tax-evasion charges and separately agreed to pay $5.5 million to settle a related whistleblower case brought under New York State’s False Claims Act (FCA).
The whistleblower, Vijay Tharwani, a former employee of the tailor, will receive $1.1 million of the settlement.
The case marked the first time the state’s recently strengthened FCA has been used successfully in a tax case; in 2010, New York became the first state to authorize citizens to sue tax cheats on its behalf.