IRS Whistleblower Office Celebrates $7B Collected on National Whistleblower Day

Since 2013, the United States has recognized July 30^th as National Whistleblower Day. The day was chosen by Congress to mark the date that the first whistleblower law was passed in the United States all the way back in 1778. The Internal Revenue Service (IRS) first issued a reward to a whistleblower in 2007. Congress created the IRS Whistleblower Program in 2006, under the Tax Relief and Health Care Act, to incentivize individuals to report tax fraud to the U.S. Government. Since then, the IRS has collected over $7 billion from fraudulent taxpayers and has subsequently awarded over $1.2 billion as IRS whistleblower awards. That number is worth repeating, over a billion dollars has been given out as IRS whistleblower rewards for individuals who have the courage to do the right thing. National Whistleblower Day celebrates the bravery of individuals looking out for the best interests of their country and serves to raise awareness for future whistleblowers with respect to the extensive financial awards and programs like the IRS whistleblower program, SEC whistleblower program, CFTC whistleblower program, and the False Claims Act, to name a few program that are available to them.

The History of the IRS Whistleblower Office

After seeing the success of other similar federal agencies (such as those under the ), Congress passed the Tax Relief and Health Care Act in 2006 to encourage individuals to come forward with insider information on tax evasion and other tax schemes such as structuring, employment tax evasion, use of shell companies, etc. The IRS program made a prominent splash in 2012 when a former UBS banker, brought information forward as a whistleblower for the tax evasion of Swiss banks, thereby leading to a sizable reward. Congress passed additional laws in 2014 and 2018 that further expanded the statute to apply to criminal fines, penalties, and forfeitures. In 2019, the office introduced new anti-retaliation protections to safeguard whistleblowers from potential retaliatory actions by their employers, albeit the program itself is designed to inherently protect whistleblower by cloaking them in anonymity with the use of an IRS whistleblower lawyer. Overall, the program has been successful, but it takes a long time to process a claim. An IRS whistleblower lawyer with a robust understanding of the process is crucial to successfully move forward a claim as the IRS expects the information to neatly be teed up articulating the basis for the claim, the applicable regulations that are being violated and insightful information if it is going to pay a whistleblower award

Notable Claims Under the IRS Whistleblower Program

The IRS Whistleblower Program has had several notable claims since its inception that have helped bring awareness of the program’s financial incentives. The National Whistleblower Day celebrates these cases and demonstrates the importance of the program to the American public. Notable claims include:

• Former UBS banker (2012): A former banker of the UBS investment banking company provided information to the government on U.S. clients who were evading taxes through secret Swiss bank accounts. This offshore tax evasion resulted in UBS bank paying $780 million to the U.S. government. This case at the time was the largest award to a whistleblower under the IRS program, with the individual recovering an amount of $104 million.
• Creator of Beanie Babies (2012): The creator of Beanie Babies, allegedly failed to report more than $24 million from Swiss bank accounts. Records showed that he had over $93 million in UBS and Zurcher Kantonalbank. Thanks to an undisclosed whistleblower, he was ultimately ordered to pay over $53 million in civil penalties.
• Wegelin & Co. (2013): Wegelin & Co., a Swiss private bank, was found to have hidden over $1.5 billion in secret Swiss bank accounts from the IRS. Ultimately, the bank was ordered to pay approximately $58 million in fines. This was a notable case in the IRS Whistleblower Program in that it was the first time a foreign bank was indicted and sentenced for tax evasion as a U.S. taxpayer.

Reporting Requirements and the IRS Whistleblower Program

The IRS has specific financial reporting requirements that, in conjunction with whistleblowers, can help convict millionaires and billionaires committing tax fraud. In particular, U.S. taxpayers must file a Foreign Bank Account Report (FBAR). FBARs are required for individuals and corporations with any financial interest or signature authority over foreign accounts that exceed $10,000. The FBAR is filed with the Financial Crimes Enforcement Network (FinCEN). The statute that provides the IRS with enforcement over foreign financial crime is known as the Foreign Account Tax Compliance Act (FACTA). Under FACTA, the IRS can hold financial institutions accountable for failing to report foreign financial assets that exceed certain thresholds.

Despite these requirements, high net worth individuals and corporations may still try to circumvent their legal reporting obligations. This is where whistleblowers with insider knowledge are crucial to the federal government. By providing the IRS with tips to uncover hidden untaxed assets, the government can identify offshore tax evasion, money laundering, and tax fraud schemes that can amount to billions of dollars. The IRS whistleblower program incentivizes individuals to come forward by providing monetary awards that can range from 15 to 30% of the collected proceeds of taxes, penalties, and interest of undisclosed foreign accounts.

The Success of the IRS Whistleblower Program

Since issuing its first award in 2007, the IRS has paid out over $1.2 billion in awards and collected $7 billion from tax cheats. In the Fiscal Year of 2023 alone, the IRS paid awards totaling $88.8 million leading to the collection of $338 million in recovered funds to the government. The IRS Whistleblower Program provided nearly 17,000 awards, which was an increase of 44% compared to the average in the prior four years. July 30th celebrates the success of the IRS Whistleblower Program, including the financial awards to IRS whistleblowers and their IRS whistleblower lawyers who play a crucial role in the process.