IRS Whistleblower Laws
The past few years have seen an increase in whistleblowers revealing IRS Tax Fraud schemes to the government and receiving significant awards from those disclosures. While the whistleblower process can seem complex and difficult to maneuver, this page outlines basic information and procedure, and a California IRS whistleblower lawyer at The Evans Law Firm can help.
The False Claims Act protects and rewards whistleblowers who bring cases on behalf of the U.S. government. Similarly, Internal Revenue Service (IRS) Tax Fraud Whistleblower Laws outline practices that reward whistleblowers for reporting tax fraud.
What Are IRS Whistleblower Rewards?
Typically, IRS whistleblowers receive rewards between 15% and 30% of the amount collected by the IRS (13 U.S.C. § 7623(b)(2)(A)). The amount, in turn, is based on penalties, interest, and additional amounts that the IRS collects as a result of the information provided by the whistleblower. Because IRS whistleblowers, unlike those of False Claims, may receive rewards even if they are not the original source of information, a secondary source informant may receive up to 10% of the amount collected. The percentage of the award is determined by the degree and extent of the whistleblower’s contribution to the uncovering of IRS tax fraud. Whistleblowers are eligible for rewards if they provide information related to tax fraud or underpayment in excess of $2 million (that includes penalties and interest); and by a taxpayer who earns over $200,000 annually (26 U.S.C. § 7623(b)(5)). A whistleblower’s reward may be denied or reduced if the whistleblower contributed to the fraud by planning or initiation (26 U.S.C. § 7623(a)(3)).
How to Submit An IRS Whistleblower Complaint
The first step in submitting an IRS Whistleblower Complaint is filling out and completing the “Application for Award for Original Information” : IRS Form 211. The whistleblower, or “claimant,” should provide reasons for why he or she believes the information provided will result in the collection of unpaid taxes. Upon completion, the whistleblower must send the form to the IRS Whistleblower Office, as per the Internal Revenue Manual, Section 126.96.36.199, under penalty of perjury and with a “Form 2848: Power of Attorney” if the claimant has an attorney representative. An on-line form can be accessed at: http://www.treasury.gov/tigta/contact_report.shtml
The Whistleblower Office at the IRS will then review the claim and follow-up if additional information is needed (Internal Revenue Manual § 188.8.131.52.). If the Whistleblower Office deems the claimant to be a confidential informant, then his or her identity becomes protected under the IRS Code Section 6103(h)(4).
How The IRS Whistleblower Award Is Determined
The information provided by the whistleblower is the main determination of the percentage awarded to the whistleblower. The following are a list of established factors taken into consideration when determining the award percentage:
1. Timing: Prompt action by the Claimant in informing the IRS of non-compliance is a positive factor, while delays in action may negatively impact the percentage of the reward;
2. Scarcity of Information: The Whistleblower will be positively rewarded if the information her or she provides is unknown or likely to remain undiscovered by the government or IRS;
3. Organization: A well-organized and thorough presentation of information will be positively received by the IRS, while violations of IRS-deemed permissible actions and information will not be viewed in a positive light;
4. Future impact: If the disclosure of information on the part of the Whistleblower will induce future noncompliant taxpayers to change their actions, this can be seen as a positive factor;
5. Cooperation: A whistleblower who assists during the investigation, audit, or trial contributes in a positive way. A noncompliant whistleblower or one who has orchestrated or initiated the tax fraud could be seen as a negative factor;
Furthermore, a whistleblower who is deemed to have planned or initiated the fraudulent or evasive conduct in a significant way may have their award reduced by 66% to 100%. If deemed to have contributed in a moderate way, the award may be reduced by 33% to 66%, and if deemed to have contributed in a minimal way, the award may be reduced by 0 to 33%. You may consult Section 184.108.40.206.2.13 for further information regarding reductions based on the Whistleblower’s involvement in the fraud.