Whistle-Blower Awards and the Bank Secrecy Act: Mutually Exclusive?

Abstract

Tax whistle-blowers provide valuable leads and often offer unique insights to compliance challenged taxpayers. The IRS must act promptly when receiving specific and credible information regarding tax compliance issues when that information can be corroborated through examination activity. In these situations, the IRS Whistle-Blower Office is charged with processing financial awards to people who provide information about the tax indiscretions of others.

Although ongoing tax-related enforcement actions have generated payment of considerable penalties associated with violations of the Bank Secrecy Act in a Memorandum for Stephen A. Whitlock, Director of the IRS Whistle-Blower Office, IRS Counsel determined that these BSA-related recoveries may not be considered for purposes of computing the amount of the award under Code Sec. 7623.

The whistle-blower statute is intended to provide valuable leads to the IRS which effectively preserves other precious tax enforcement resources. Information provided by whistle-blowers is helpful when IRS resources are being stretched thin and compliance functions curtailed. Further, a visible, well-respected IRS whistle-blower program increases public interest in the program and could cause countless otherwise compliance-challenged taxpayers to voluntarily comply ... deterrence can be a persuasive and relatively inexpensive tax enforcement tool.

Keywords: BSA, tax whistle-blower, FBAR, IRS, tax enforcement, OVDP, OVDI