IRS Whistleblower Program

Published on January 23,2017 by Jeffrey Haber
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Do you have evidence of substantial tax fraud or other misconduct that you would like to report to the IRS? A whistleblower to the IRS may be eligible for monetary rewards when they report a violation of federal tax laws to the agency that results in the collection of back taxes, penalties, and interest that exceeds $2 million. The IRS whistleblower program also ensures that the identity of the whistleblower will remain confidential to the fullest extent possible.

Who Can Be a Whistleblower to the IRS?

The IRS whistleblower program was established by the Tax Relief and Health Act of 2017 to encourage individuals with knowledge of tax fraud to make reports to the IRS. Under the Act, a whistleblower reporting tax fraud may be entitled to a reward equal to 15-to-30% of any recoveries made by the government. To be eligible for a whistleblower tax award, the fraud involved must exceed more than $2 million (including penalties and interest). If the tax fraud report involves an individual, that person’s annual gross income must exceed $200,000.The types of tax fraud that may be reported by an IRS whistleblower include:

  • Tax Evasion
  • Filing Fraudulent Returns
  • Underpayment of Taxes
  • Use of Abusive Tax Shelters
  • Recording Personal Expenses as Business Expenses
  • Maintaining Two Sets of Books or Records
  • Making False Entries in Books or Records

IRS whistleblower rewards can not be paid to anyone who is an officer or employee of the U.S. Department of the Treasury, or is acting within the scope of his or her duties as an employee of any federal, state, or local government. Individuals who are required by law to disclose the information contained in an IRS whistleblower submission  – such as a member of a state body or commission who would have access to federal returns, copies or abstracts – are not eligible for a financial award. Finally, rewards can not be paid to an individual who gained access to taxpayer information that forms the basis of a fraud report because of contact with the federal government.

With the exception of the scenarios described above, an IRS whistleblower can be anyone who is able to make a “substantial contribution” of information regarding tax fraud to the IRS, including former and current employees, managers or officers of a company. Tax whistleblowers are also not required to be citizens of the United States. Whistleblowers to the IRS may be eligible for a reward even if they played a role in the fraud being reported.

Claiming a Whistleblower Tax Reward

To claim a reward, an IRS whistleblower must complete IRS Form 211, Application for Award for Original Information, which is required to be signed under penalties of perjury. In completing Form 211, the whistleblower must take care to provide a detailed summary of facts and supporting evidence, including a list of witnesses and key individuals involved with the fraud. The IRS is far more likely to initiate an investigation if the submission is as thorough and detailed as possible. Failure to provide all known or available information is likely to affect the final determination of any whistleblower reward.

Once the IRS receives Form 211, the agency will evaluate the claim to determine if the case should be pursued. Depending on the complexity of the issues involved, this evaluation could take several months, and the IRS may contact the whistleblower for additional information. If the IRS decides to pursue the case, it will be assigned to a revenue agent and case manager, and the individual(s) or entities named in the report will be subject to an examination. This process may take a year or more.

The whistleblower reward will be determined once the matter has resolved, and the IRS collects all of the back taxes, penalties, and interest owed by the taxpayer. Depending on the whistleblower’s contribution, the reward will range from 15% to 30% of the amount collected by the IRS. The final amount of the whistleblower tax reward may be reduced if the claimant planned or initiated the fraud. The reward may also be reduced if the information contained in the IRS Form 211 had been previously disclosed. Should the IRS whistleblower believe that the final reward does not fairly recognize their contribution, an appeal may be made to the U.S. Tax Court.

Contact Bernstein Liebhard LLP to Learn More about the IRS Whistleblower Program

Reporting tax fraud to the IRS whistleblower program is a complex process, and the quality of a submission can have a significant impact on the financial compensation an individual may receive. If you are thinking about becoming a whistleblower for the IRS, please contact Bernstein Liebhard LLP for a confidential review of your claim. Our attorneys will fully explain the qualifications for becoming a tax whistleblower, and will assist you through every step of the process. To speak with a member of our legal staff today, please call (888) 992-0017.