The Internal Revenue Service has recommended new whistleblower rules which could weaken the Foreign Account Tax Compliance Act. The FATCA seeks to thwart international tax evasion by mandating that foreign financial institutions must report information regarding U.S. taxpayer accounts to the IRS. Under the Bank Secrecy Act, taxpayers who have financial interest or signature authority over a foreign financial account must report account information each year to the IRS by filing a Report of Foreign Bank and Financial Accounts. At this time, if a whistleblower provides the IRS with information to collect taxes, the whistleblower can obtain awards under the IRS Code, Section 31.
Critics say the newly proposed IRS rules would allow whistleblower claims to languish, would severely limit the size of awards, make it less likely that people would come forward, and make it more difficult for whistleblowers to collect awards. U.S. Senator Charles Grassley of Iowa stated that the proposed IRS regulations would “hamstring the program by limiting whistleblower awards and discouraging knowledgeable insiders from coming forward.” The IRS is allowing comments on the proposed rules until February 19, 2013, with public hearings most likely to follow.
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