The IRS recently put forward an expanded list of IRS audit priorities that serves as a roadmap as to the focus for the agency – and a guide for tax whistleblowers. One of the biggest hurdles for a tax whistleblower is not only making a good submission – but also having the whistleblower’s submission attract the attention and focus of the IRS. Thus, knowing what is of interest to the IRS is most helpful for tax whistleblowers.
Mr. De Lon Harris – commissioner of examinations in the IRS Small Business/Self Employed Division (SB/SE) stated at the December 9th American Bar Association conference in Las Vegas, NV that the top ten priority areas for IRS examination are:
1) High-net-worth / high income nonfilers
2) Global high wealth
3) Large pass-thru entities
4) Large corporate compliance
5) Employment tax
6) Transfer pricing
7) Nonfiler virtual currency (cryptocurrency)
8) Bank Secrecy Act/Title 31
9) Abusive transaction promoters
10) Special enforcement program (which has a focus on illegal/legal unreported income)
I would add excise taxes to this list as well – given the IRS is finally hiring new agents to cover this area – finally blowing the dust off a lot of old files.
As the IRS has already hired 2,000 more examiners at SB/SE (and possibly 2,000 more based on increased IRS funding) – I expect a significant increase in examination activity by the IRS in the next few years — with a focus on these priority areas.
Role Of Whistleblowers
The IRS has been good at utilizing information from tax whistleblowers in successfully pursuing illegal off-shore accounts held by wealthy individuals and provided significant awards. I anticipate that the IRS will be similarly interested and engaged in utilizing information from tax whistleblowers regarding these new exam priorities. As I’ve discussed previously, the IRS is going to pay particularly close attention to information from tax whistleblowers who are knowledgeable insiders, with current information about recent (and/or ongoing) instances of tax evasion by specific taxpayers. Any documentation that the tax whistleblower has of the tax evasion is a big plus.
I asked my colleague Eric Hylton who recently retired as Commissioner of SB/SE at the IRS (and has a wealth of experience and knowledge on IRS criminal and offshore investigations) his reaction to the IRS announcement on exam priorities. He first noted that the IRS defines high-net worth individuals as taxpayers over $200,000 in total positive income and global high wealth taxpayers as businesses and financial enterprises controlled by individuals over $10 million. (Tax whistleblowers should remember that the mandatory award program requires in general a filing that outlines evasion of over $2 million dollars in tax/penalties/interest).
Eric also highlighted that he expects the IRS to take a more complete picture of the taxpayer – including business income, partnership (especially tiered entities), charity/foundations or other related interests versus a more traditional specific item approach (an important point for whistleblowers – to try and encompass all the possible tax evasion by a taxpayer in their filing). Finally, Eric made clear that cryptocurrency and cryptocurrency sales is already of significant focus and interest to the IRS.
The marked increase in IRS examiners – and the IRS now showing that they (similar to Ko-Ko from the Mikado) has "got a little list" of taxpayers of interest – is good news for tax whistleblowers.
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Tax Whistleblowers: What Tax Issues Does The IRS Want To Hear About From Whistleblowers? - Forbes
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