What is an IRS Whistleblower?
The IRS Whistleblower Program is one of the strongest anti-fraud award programs available to whistleblowers who report tax evasion and fraud. Congress required the IRS to establish the IRS Whistleblower Office to pay rewards to whistleblowers who report specific and credible information to the IRS and if the information results in the collection of taxes, penalties, interest or other amounts from the non-compliant taxpayer. Below is a brief overview of the IRS Whistleblower Program, along with some important information about rewards, protections, and other crucial steps you can take if you’ve witnessed fraud.
IRS Whistleblower Rewards
There are several qualifications needed to become an IRS whistleblower. There are also other requirements that IRS whistleblowers must meet in order to become eligible for financial rewards.
Like other qui tam whistleblower laws, 26 USC 7623 of the IRS tax whistleblower law offers payouts ranging from 15 to 30 percent of the amount recovered if the penalties, taxes, and interest collected exceed a certain threshold. In this case, they must exceed $2 million.
If the IRS whistleblower case deals with an individual, his or her annual gross income must be more than $200,000.
If the IRS whistleblower disagrees with the outcome of their case, they can begin an appeals process in Tax Court.
Claimants who do not meet the $2 million threshold or do not have cases involving individuals with annual gross incomes of $200,000 or more can still qualify for awards. The whistleblower rewards through this program are less, with a maximum award of 15% of the sanctions collected, up to $10 million. In these cases, the IRS whistleblower cannot appeal the decision in Tax Court.
Once an IRS whistleblower claim is filed, the Whistleblower Office will examine the case and decide if the claim is worth pursuing. The entire process, which includes the time from the submission of the whistleblower claim and the collection of the proceeds, can take several years. The payment of whistleblower awards cannot be made until the IRS has collected all of the taxes, penalties, and interest.
How do you file an IRS Whistleblower Claim?
In order to qualify for an IRS whistleblower award under 26 USC 7623, claimants must submit an IRS Form 211 (application for Award for Original Information). It is important for IRS whistleblowers to completely fill out the Form 211 and not withhold any information. If available information is withheld, the whistleblower risks the chance that important evidence isn’t considered in the award determination.
With the Form 211, the IRS whistleblower should provide any supplemental documents or evidence that may help the IRS in their investigation. If the documents or supplemental information are not in the whistleblower’s possession, the whistleblower should describe the evidence and the location of the evidence to the best of their ability.
In some cases, the IRS Whistleblower Office will reduce the amount awarded to the claimant.
- Rewards must be reduced up to 10% in cases based principally on disclosure of specific allegations resulting from:
- Judicial or administrative hearings,
- From a governmental report, hearing, audit or investigation,
- Or from the news media.
- An appropriate reduction if the whistleblower “planned and initiated” the non-compliance.
It is important to seek legal advice from an experienced whistleblower law firm when you are filing an IRS award claim or providing information to the IRS. They will review your case and find out if you will be eligible for a financial award based on the IRS Program and existing tax laws.
The best way for whistleblowers to protect themselves from retaliation is to remain completely anonymous and confidential throughout the entire whistleblowing process. While anonymous filings are not permitted by the IRS Whistleblower Program, the IRS is required to protect the confidentiality of the claimant to the fullest extent of the law.
The IRS Whistleblower Program does not contain an anti-retaliation provision. However, IRS whistleblowers may use certain state and federal laws to protect themselves from retaliation.
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Frequently Asked Questions
Whistleblowers must submit an IRS Form 211 (application for Award for Original Information), which should contain in-depth information about a criminal tax scheme, or the non-criminal underpayment of taxes. If information is withheld, the whistleblower may risk the chance that important evidence isn’t considered in the award determination stage. Whistleblowers are only eligible to file an IRS reward claim if potential recoveries exceed $2 million, and if the IRS whistleblower case deals with an individual, his or her annual gross income must be more than $200,000.
To qualify for a whistleblower award, the fraud being reported must exceed $2 million. If the IRS whistleblower claim deals with an individual, their annual gross income must be more than $200,000. If a reward from the IRS fails to recognize the whistleblower’s claim, the whistleblower has the right to appeal the reward amount to the US Tax Court.
Whistleblowers who report criminal tax schemes or the non-criminal underpayment of taxes may be eligible to receive between 15 and 30 percent of the amount recovered if the penalties, taxes, and interest collected exceed a certain threshold.