Form 211 questions

[Judge Roy Bean]

This is far outside my field of expertise so I'll present it to this august body.

A relative (distant) has asked me to advise her on filling out the whistleblower paperwork on her former employer. The first question wasn't the possible amount of the award, it was "can they (the perpetrator) find out who reported them?" I would hope not but have no experience to go on.

The next question involves her possession of incriminating evidence in the form of copies of tax returns she obtained before she left. Do the regulations regarding collection and/or prosecution allow the use of documentation that was essentially stolen by an employee? My recommendation thus far is that she should not reveal the fact that she has those kinds of things; the IRS can certainly get the information without her involvement.

The other issue is one of criminal prosecution vs. simple administrative collection remedy. If the perpetrator is incarcerated the business will most likely close, a number of people will be out of work and some of them are still her friends. He has the personal financial resources to make good on the two or three years of employment taxes, witholding, SS, etc., but what is most likely to occur in such a situation?

[jcolvin2]

A relative (distant) has asked me to advise her on filling out the whistleblower paperwork on her former employer. The first question wasn't the possible amount of the award, it was "can they (the perpetrator) find out who reported them?" I would hope not but have no experience to go on.

The IRS goes to great lengths to attempt to protect whistleblowers, treating such persons essentially like confidential informants in a criminal case. I am virtually certain that the IRS will not willingly divulge the name of the whistleblower, and the name of the whistleblower should be redacted on any materials the taxpayer obtains from the IRS. This being said, sometimes the taxpayer can figure out the identity of the informant by the type of information provided, the dates of meetings, etc.

The next question involves her possession of incriminating evidence in the form of copies of tax returns she obtained before she left. Do the regulations regarding collection and/or prosecution allow the use of documentation that was essentially stolen by an employee? My recommendation thus far is that she should not reveal the fact that she has those kinds of things; the IRS can certainly get the information without her involvement.

Agreed. I do not think there are any regulations that would somehow limiting the IRS's ability to use information purloined from the taxpayer, but it might make your relative look bad to the IRS analysts. If the records she has evidence the existence of a crime (e.g. copies of unfiled tax returns reflecting large liabilities), I would not hesitate to provide them to the IRS.

The other issue is one of criminal prosecution vs. simple administrative collection remedy. If the perpetrator is incarcerated the business will most likely close, a number of people will be out of work and some of them are still her friends. He has the personal financial resources to make good on the two or three years of employment taxes, withholding, SS, etc., but what is most likely to occur in such a situation?

I think in most cases, the IRS is most likely to pursue civil collection and forego criminal prosecution. There are millions of people who owe the IRS substantial sums of money, and only relatively egregious cases get prosecuted. In this vein, there are not a large number of criminal tax cases prosecuted in this country (less than 2,500/year). The bulk of the criminal tax prosecutions involve false entries on tax returns, rather than activities undertaken by taxpayers to avoid collections (though prosecutions in the latter category is increasing).