News & Articles

When Filing Form 3949-A to Report Tax Fraud, Better Keep a Copy

07 / 26 / 2019

Kasper v. IRS, 150 T.C. 8 (2018)

Tax Form:  IRS Form 3949-A (sending in "tips" of tax fraud to the IRS)

Tax Trouble Created:  By not keeping a copy, with proof of mailing, or green card, whistleblower not able to prove that he actually submitted it to the IRS.

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In this case, an IRS whistleblower sought an award of over $11 million, claiming that he blew the whistle on his former employer, who he claims failed to pay overtime wages to its employees (and thereofre, didn't withhold or remit taxes associated with the unpaid wages).  The IRS determined that the information wasn't related to a federal tax issue; that it was a DOL issue, and denied his application.  The whistleblower petitions to go to the Tax Court to challenge IRS' determination.  The whistlebloer claims that the IRS used his information to hold open a bankruptcy claim against this former employer that eventually led to a $37.5 milion payment to the Treasury Department.  He wants his cut.  

The whistleblower (Kasper) then admits that the IRS WBO did not independently act on his Form 211.  But, he claims that he submitted the same information to the IRS's Fresno office on a Form 3949-A, Information Referral, dated January 26, 2009, which he claims held open the bankruptcy proceedings.  The parties admitted that the bankruptcy proceeding did eventually lead to the collection of $37.5 million.

The IRS could not corroborate that Kasper had, in fact, filed a tip, using Form 3949-A, because its manual or policies state that if it doesn't take action within 90 days, such information referrals are then destroyed.

For these reasons, whistleblowers should keep a copy of whatever is submitted to the IRS as part of any whistleblower submission.