HomeFAQsIRS / Tax FraudWhat Is Covered Under The IRS Tax Whistleblower Reward Program?

What Is Covered Under The IRS Tax Whistleblower Reward Program?

IRS Whistleblower Program - Kohn, Kohn & Colapinto LLP

The IRS Whistleblower Reward program covers a wide array of criminal violations and the non-criminal underpayment of taxes. These violations include off-shore tax havens, shell accounts, money laundering, pyramid schemes, false reporting, and more.

The IRS Whistleblower Office rewards qualified individuals who report tax fraud or evasion and whose information is used by the IRS in successful sanctions against tax fraud. The award percentages vary based on the quality of the information provided but are between 15 and 30 percent of the proceeds collected in a successful enforcement action.

The IRS pays whistleblower rewards after a final determination and when a taxpayer has exhausted all appeal attempts and is ineligible to recover proceeds from the government. From 2007 to 2020, the IRS Whistleblower Office recovered over $5.9 billion and paid over $1 billion in whistleblower awards.

Reporting Tax Fraud

Reporting tax fraud and filing for rewards is a straightforward process, but it does have some eligibility requirements. Below is an example sequence of steps a whistleblower can take to begin the process of reporting tax evasion or underpayments:

  • Qualification
    The IRS is not only interested in credible and specific information regarding a potential tax violation or underpayment but also in cases where the amount exceeds a certain threshold. For someone to get a reward for reporting an individual for tax evasion, the amount must exceed $200,000 – and for an organization, that amount is $2 million. After meeting these criteria, a whistleblower can move on to the next phase.
  • Find an Attorney
    Once you’ve confirmed that you qualify for a whistleblower reward, you should find an attorney who can help guide you through blowing the whistle and filing all of the paperwork for the reward application. Having a whistleblower attorney on your side will significantly improve your chances of receiving the highest award.
  • Gather Evidence – the IRS Whistleblower Office is looking for specific, original, and credible information about a specific tax violation or underpayment. Those with insider knowledge of a specific tax fraud scheme should document their findings with as much detail as possible to increase the quality and effectiveness of their application.
  • Submit Claims – the next step in the process is filing IRS Form 211 – also known as the Application for Award for Original Information. This form will contain a description of the tax violation or underpayment, along with documentation, such as copies of financial books and records, contracts, emails, ledger sheets, and more.

Read more:
Reporting Someone to the IRS: A Whistleblowers Guide

Key Amendments

The 2018 amendment to the IRS whistleblower tax law defined the types of “collected proceeds” for which a whistleblower could obtain a reward.

In 2006, the creation of the Tax Relief and Health Care Act resulted in significant changes in the IRS award program for whistleblowers. Nothing much before that has changed.

Since 1867, the Secretary of the Treasury has had full authority to pay awards “for detecting and bringing to trial and punishment persons guilty of violating the internal revenue laws or conniving at the same” under the Internal Revenue Act.

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Frequently Asked Questions

The IRS Whistleblower Reward program covers a wide array of criminal violations and the non-criminal underpayment of taxes. These violations include off-shore tax havens, shell accounts, money laundering, pyramiding, false reporting, and more.

The IRS tax whistleblower program does not allow for anonymous reporting. But it does require that the IRS protect the confidentiality of whistleblowers to the fullest extent permitted under law. The program has gained a positive reputation for protecting the identity of IRS whistleblowers.

The 2018 amendment defines the scope of the tax whistleblower reward provision as follows:

SEC. 41108. CLARIFICATION OF WHISTLEBLOWER AWARDS.

  • (a) DEFINITION OF PROCEEDS.—
    • (1) IN GENERAL.—Section 7623 is amended by adding at the end the following new subsection:
      • ‘‘(c) PROCEEDS.—For purposes of this section, the term ‘proceeds’ includes—
        • ‘‘(1) penalties, interest, additions to tax, and additional amounts provided under the internal revenue laws, and
        • ‘‘(2) any proceeds arising from laws for which the Internal Revenue Service is authorized to administer, enforce, or investigate, including— 
          • ‘‘(A) criminal fines and civil forfeitures, and
          • ‘‘(B) violations of reporting requirements.’’