In September, this column addressed ethical constraints on lawyers who blow the whistle on former clients. While such limitations present a hurdle to one potentially productive source of information, over the past decade whistleblowing has become big business, generating substantial paydays for disgruntled spouses, former business partners and others who seek to profit by reporting tax fraud to the Internal Revenue Service. Perhaps more importantly, information from whistleblowers has generated billions of dollars in revenues for the IRS. If the IRS has its way, however, a case pending before the U.S. Court of Appeals for the D.C. Circuit stands to significantly limit the size of whistleblower awards—an outcome the Senator responsible for creating the IRS Whistleblower Office and a group of former federal prosecutors and Tax Court practitioners worry could hamper the IRS’s enforcement of the Internal Revenue Code.
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