The IRS’s whistleblower program just netted its first big fish – and it’s a financial services firm.

The tax agency awarded an accountant $4.5 million for turning in his former investing firm for unpaid taxes.

Apparently the accountant let his firm know about the tax discrepancies. But the company didn’t take his concerns seriously enough or respond satisfactorily for the bean counter.

He got in touch with the IRS through its whistleblower office, authorized by Congress in 2006.

The company must now pay $20 million in back taxes and interest. The accountant can do what he wants with his $3.24 million check from the IRS.

(That’s $4.5 million minus the mandatory 28% tax hit, of course.)

Expect more scrutiny from the feds – and in-house

Could the IRS’s whistleblower program cause problems for the majority of financial services firms that operate by the book?

Maybe so.

Even the most honest firm can make tax payment mistakes, what with all of the ever-changing tax and regulatory rules. Sometimes it seems like you need an army of accountants just so you can stay in full compliance!

All it takes is one disgruntled employee looking for an accounting error to cause problems. Two keys to preventing a similar problem:

• Take any accounting concerns/complaints seriously. Make them an immediate priority, even if you’re 99% sure your firm’s in the right.
• Communicate with would-be whistleblowers about their concerns and document all conversations.

Do you think the IRS will target more financial services firms? Let us know your opinion.

Tags: compliance, financial services, internal revenue service, IRS, irs whistleblower office, taxes