Each year, the government loses hundreds of billions of dollars to tax fraud. To combat the problem, both the IRS and New York State have adopted whistleblower programs that offer significant rewards to those who “blow the whistle” on individuals and businesses who owe significant tax liabilities. For knowing violations of the tax law, New York imposes treble damages and offers whistleblowers up to 30 percent of the damages recovered from the wrongdoer.

While no list can be exhaustive, some common types of tax fraud that could support a whistleblower claim under either or both the IRS and New York tax whistleblower programs include:

• Hiding income in secret, offshore accounts
• Investing in or promoting bogus tax shelters
• Misclassifying workers and paying employees under the table
• Failing to report or hiding income and/or exaggerating expenses or deductions
• Filing false claims for credits
• Engaging in sales tax evasion

In August 2010, New York became the first state in the nation to affirmatively authorize whistleblowers to bring cases under its False Claims Act based on serious violations of the tax law. Hodgson Russ attorney William (Bill) J. Comiskey, who was previously New York’s chief tax enforcement officer and who now heads the firm’s tax whistleblower practice, represents both tax whistleblowers and businesses that have been investigated under New York’s tax whistleblower laws. He has written, lectured, and commented extensively on the new law.

New York’s tax whistleblower cases are investigated by the New York attorney general’s office, which has made clear its intention to use the new law aggressively. Bill prosecuted and supervised fraud cases—including national false claims cases—in the attorney general’s office for more than 18 years. Bill brings his unique blend of tax, false claims, and fraud investigative experience to each whistleblower case, whether he is representing a whistleblower with a viable claim or a business that has been wrongly accused.

The IRS whistleblower program is different from New York’s program but it too offers significant rewards to whistleblowers who provide information leading to the recovery of owed taxes from tax delinquents. Unlike the state False Claims Act provisions, the IRS whistleblower program is available to all those who report any owed-tax liability, not just liabilities that are based on knowingly false claims.

Many tax whistleblower claims will have both state and federal components. Hodgson Russ’s tax attorneys have broad experience in both state and federal tax law. Indeed, in some areas of tax law, our attorneys have literally “written the book” on key tax issues, enabling us to offers tax whistleblowers a unique blend of substantive, technical tax knowledge and false claims experience.

Report Tax Fraud

The first step in reporting tax fraud is to talk to a qualified, experienced attorney, like the tax and False Claims Act attorneys at Hodgson Russ. We will thoroughly discuss the facts of your potential case with you, reviewing the allegations and applicable law and conducting any necessary factual investigations with your participation. If you and we decide to move forward with our representation of you and the report of tax fraud, we will execute an engagement letter and draft a complaint and other case initiation documents.