IRS Announces Process for Review of Whistleblower Claims by IRS Large and Midsize Business Division (LMSB)

As another step toward the further development of the new IRS Whistleblower Program, our friends at the IRS Large and Midsize Business Division (LMSB) in Lower Manhattan have announced a three-step process for IRS Whistleblower claims that are eligible for the new “rewards” authorized by Congress in December 2006.

IRS Commisioner Frank Ng describes it as a “process for analyzing informant information and disseminating it to the field” for claims with at least $2 million in question, which is the threshold amount for whistleblowers to be eligible to receive the new IRS whistleblower rewards of 15-30% of the government’s recovery.

The first step is the “initial receipt of information and the initial review of the claim from the informant [whistleblower],” primarily by the IRS Whistleblower Office.

Second, the Whistleblower Office will “send the informant information to a Subject Matter Expert (SME) in each Business Operating Division,” who will “evaluate the information provided by informants to determine its merit and what action should be taken.”

As our whistleblower lawyer blog has written about previously, the IRS has taken steps to ensure that privileged or unlawfully obtained information is not presented. The ‘Subject Matter Expert” will “insulate the audit team from direct contact with the whistleblower and must ensure the audit team does not receive ‘tainted’ information. Tainted information may include documents that are subject to privilege or were illegally obtained by the informant.”

In the third step, “Counsel and the SME will make a recommendation to the Industry Director on the legal issues and risks associated with the informant information.” The Industry Director then “will decide whether and how to proceed with the case.”

The complete Memorandum from Commissioner Ng can be found at https://www.irs.gov/businesses/article/0,,id=185244,00.html.

We congratulate the IRS on the continued development of this valuable program!