How does the IRS Whistleblower Program Work?
In some cases, the IRS will pay an award to people who “blow the whistle” on people who don’t pay the taxes they owe. The IRS relies on information provided to them to investigate some of these cases, which can pay off for the whistleblower with an award of up to 30 percent of the amount they collect.
Who is Eligible to Get an Award?
The IRS will pay an award to someone who offers credible and specific information that ends up with the agency collecting taxes, penalties, interest, and/or other reimbursement from the offender.
Someone who presents generic information or some information that is public knowledge is not eligible. The IRS wants credible and verifiable information, not unsupported guesses or speculation. The issue at hand also needs to be one of federal tax importance. The whistleblower program is not designed to resolve business disputes or personal problems.
How to Qualify for an Award?
There are essentially two types of IRS whistleblower awards. The first is where the amount in dispute is more than two million dollars. Several other qualifications must be met, and if they are, the whistleblower can potentially receive between 15 percent and 30 percent of the amount collected. If the case involves a person rather than a company, their annual gross income has to exceed $200,000. In the event the whistleblower disputes the outcome, there is the option to appeal with the Tax Court pursuant to IRC Section 7623(b).
The other program is for whistleblowers where the amount in dispute doesn’t meet the financial thresholds. The highest award is 15 percent up to ten million dollars. Awards are discretionary in these matters and cannot be disputed by the whistleblower, pursuant to IRC Section 7623(a).
How the Whistleblower Process Works
The whistleblower process must be followed, otherwise you will not be eligible for an award. Some of the standard procedures include:
- Relevant information must be submitted to the IRS whistleblower office via IRS Form 211;
- The information cannot be previously reported;
- The IRS must use the information to settle or prosecute the case; and
- The report must be made within three years of the incorrect tax returns, or it can be up to six years if the return understated income by a minimum of 25 percent.
There is no time limit on filings that involve false tax returns that were knowingly filed with the intention of committing tax evasion.
Whistleblowers who can provide documentation and actual evidence are more likely to receive an award, especially if you are privy to how the unlawful action works. It’s important to obtain a paper trail, but you don’t want to break the law yourself.
Starting the Whistleblower Process: Retaining an Attorney
Before taking any action, it’s best to speak with a skilled Florida whistleblower attorney who can advise you on whether you have a potentially viable case and what the next steps are. If you have valuable information regarding someone or a company committing tax fraud, contact Rabin Kammerer Johnson at 561-659-7878 to schedule a consultation.
Resources:
irs.gov/compliance/internal-revenue-code-irc-7623b
irs.gov/compliance/internal-revenue-code-irc-7623a
