IRS Whistleblower Program

Tax evaders defraud the federal government out of hundreds of billions of dollars each year. Under the Tax Relief and Health Care Act, enacted by Congress in 2006, private citizens who reports tax fraud by companies or individuals to the Internal Revenue Service (“IRS”) are entitled to a reward of between fifteen and thirty percent of any recovery of owed taxes, penalties, and fees recovered in a successful tax enforcement action. In addition to recovering all amounts do to it by the tax offender, the IRS may impose a civil penalty of up to seventy-five percent of the amounts owed as a result of the tax fraud.

Types of tax fraud

Tax evaders come in all shapes and sizes. The IRS Whistleblower Program provides an award for information about a tax fraud of over $2 million that leads to a successful recovery. Moreover, the IRS Whistleblower Program applies only to those individuals whose gross income exceeds $200,000 for any taxable year. Some common types of tax fraud include:

  • Participating in abusive tax shelters used to avoid the payment of taxes;
  • Maintenance of off-shore accounts as a means to hide assets
  • Filing of false or fraudulent tax returns
  • Making false entries in a company’s books or records
  • Employment tax fraud by misclassifying workers or paying them in cash
  • Money laundering

IRS Whistleblower Protections

The IRS Whistleblower Program requires IRS officials and employees to maintain the confidentiality of the whistleblower during its investigation. Further, whistleblowers may appeal the reward amount to the U.S. Tax Court if the whistleblower believes the IRS failed to accurately gauge his or her contribution to the IRS case.

Eligibility for an award

There is no requirement that an IRS whistleblower be a corporate insider to be eligible for an award under the IRS Whistleblower Program. Nor is there a cap on the amount of money that the IRS can award under the program for information leading to a successful recovery (a whistleblower was recently awarded $104 million for information leading to the uncovering of an extensive Swiss banking scheme). The amount of the award will depend on whether the whistleblower substantially contributed to a successful resolution of IRS action. However, the IRS can reduce an award if the whistleblower initiated or participated in the fraud, or if the information was already publicly disclosed.

To learn more about reporting tax fraud under the IRS Whistleblower Program or to request a free, confidential case evaluation, contact Stone & Magnanini’s IRS Whistleblower Team.