The IRS previously said in Chief Counsel Notice 2008-011 that in the case of current-employee informant, the IRS may not use information provided subsequent to the informant's initial submission and debrief and there could be no further contact with the informant, whereas the new Chief Counsel Notice 2010-004 (issued February 17, 2010) replaces that position with a facts and circumstances test to determine whether it can use such information and whether further contacts are allowed.

"In our experience, high-level employees - the insiders Congress hoped to attract when they created the whistleblower reward program - can best provide the type of information that ultimately leads the IRS to assess and recover unpaid taxes, and they obtain that information legally because it is in their job description to have it," said Gregory S. Lynam, Tax Partner at The Ferraro Law Firm. 

 

In Notice 2010-004, the IRS said it will now look at the facts and circumstances of each case before applying the "one bite" rule to current-employee informants.  

 

"We believe that with this new Notice in place the IRS will be able to administer the Whistleblower program consistent with Congressional intent and in a manner that makes use of the best information available," said Scott A. Knott, Tax Partner at The Ferraro Law Firm.

 

"By freeing itself from the shackles of the old interpretation, the IRS has righted its previous wrong and is no longer casting aside the highest value information from the highest-level insiders," added Lynam.