All About the IRS Whistleblower Program: Reporting Tax Fraud and Earning Rewards
The Internal Revenue Service (IRS) is responsible for ensuring that taxpayers comply with tax laws and pay their accurate taxes. However, with millions of taxpayers filing returns each year, it is not uncommon for tax fraud and evasion to occur. To help identify and prosecute these cases, the IRS established the Whistleblower Program in 2006, which provides monetary rewards to individuals who provide information leading to the collection of unpaid taxes, penalties, and interest.
In this article, we will provide an overview of the IRS Whistleblower Program, including the criteria the IRS is looking for, how to report tax fraud, and examples of whistleblower awards.
What is the IRS Whistleblower Program?
The IRS Whistleblower Program provides rewards to individuals who provide specific and credible information to the IRS about taxpayers who have not paid their taxes, or have engaged in tax fraud or evasion. If the information provided leads to the collection of taxes, penalties, and interest, the whistleblower may receive a reward of up to 30% of the amount collected by the IRS. It is a very slow process that can take years and for a case to succeed generally it should be written up with great specificity. Mere allegations or suspicions of tax fraud without detailed supporting information will in all likelihood fail. With the use of an IRS whistleblower program there’s a chance for the whistleblower to stay anonymous from start to finish, but one should not always bank on that anonymity. Since certain IRS violations may have a criminal component, the predicate information provided to the IRS may stimulate a criminal investigation and prosecution in which a defendant may try to access the originator of the information. With that being said, it’s unlikely to occur in that manner, so even though it’s a possibility its not a probability.
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Criteria for Eligibility for an IRS Whistleblower Award
To be eligible for a reward under the IRS Whistleblower Program, the whistleblower must meet the following criteria:
- The information provided must be specific and credible. The information provided should include the taxpayer’s name, address, and social security number or taxpayer identification number, as well as details of the fraudulent activity or noncompliance.
- The taxes owed must exceed $2 million. The IRS will only consider information related to cases in which the tax, penalties, and interest owed exceed $2 million for individual taxpayers or $10 million for corporate taxpayers.
- The whistleblower must provide original information. The information provided must not be previously known to the IRS or in the public domain.
- The whistleblower must provide the information voluntarily, that is it can’t be a result of a legal obligation or as part of their job duties.
The whistleblower must provide the information in a timely manner. The information provided must be timely and significant to the IRS’s ability to collect taxes, penalties, and interest. So, just like anything else in the law, the longer you sit with the information the more stale it becomes and the government may either think you unclean hands or helped facilitate the conduct. In either event, you should still go over your options with an IRS whistleblower law firm that offers a free, confidential consultation.
How to Report Tax Fraud
The first thing you should do is understand whether the information you have would qualify under the IRS whistleblower program. You only have one shot to file your information as precisely as possible, so it’s strongly advised to retain a whistleblower law firm to assist with the long, protracted process and to maximize the presentation.
The IRS whistleblower law firm will assist in completing various forms including Form 211, Application for Award for Original Information, to the IRS. The form should include as much detail as possible about the fraudulent activity or noncompliance, including the taxpayer’s name, address, and social security number or taxpayer identification number, as well as details of the fraudulent activity or noncompliance. Through the use of the law firm they will shield your identity as the whistleblower.
After receiving the information, the IRS will review the case and determine whether the information provided is specific, credible, and timely, and whether it meets the criteria for a reward under the Whistleblower Program. If the case is successful and the IRS collects taxes, penalties, and interest as a result of the whistleblower’s information, the whistleblower may be eligible for a reward of up to 30% of the amount collected.
Examples of IRS Whistleblower Awards
The IRS Whistleblower Program has been successful in identifying and prosecuting cases of tax fraud and evasion. For example, in 2018, the IRS awarded a whistleblower $45 million for providing information about a multinational corporation that was not paying taxes on its profits earned in the United States. The whistleblower’s information led to the collection of $1.5 billion in taxes, penalties, and interest.
In another case, a former employee of a financial institution received a whistleblower award of $104 million for providing information about the institution’s offshore tax evasion schemes. The information provided led to the collection of $5 billion in taxes, penalties and interest.
Whistleblowers have also played a significant role in identifying cases of tax fraud and evasion by wealthy individuals. In 2013, a whistleblower received a reward of $104 million for providing information about a wealthy individual who had not paid taxes on over $1 billion in income. The whistleblower’s information led to the collection of $5 billion in taxes, penalties, and interest.
In addition to large awards, the IRS Whistleblower Program has also provided rewards to whistleblowers for smaller cases of tax fraud and evasion. For example, in 2019, the IRS awarded a whistleblower $1.7 million for providing information about a company that was not paying payroll taxes. The whistleblower’s information led to the collection of $8.5 million in taxes, penalties, and interest.
The IRS Whistleblower Program provides a valuable tool for identifying and prosecuting cases of tax fraud and evasion. Whistleblowers who provide specific and credible information to the IRS about taxpayers who have not paid their taxes, or have engaged in tax fraud or evasion, can receive rewards of up to 30% of the amount collected by the IRS. To be eligible for a reward, whistleblowers must meet the criteria for eligibility and provide original and timely information.
If you have information about tax fraud or evasion, you may be eligible for a reward under the IRS Whistleblower Program. Contact an IRS whistleblower attorney to discuss your options and determine the best course of action. Reporting tax fraud not only helps to ensure that taxpayers pay their share of taxes, but it can also result in significant rewards for whistleblowers who provide valuable information to the IRS in the right manner.