What It Covers
The IRS whistleblower provisions are contained in Section 406 of the Tax Relief and Health Care Act of 2006. It allows the IRS to reward whistleblowers who provide information about claims involving tax evasion or fraud amounting to at least $2 million (in taxes, penalties and interest). If an individual rather than an entity commits the fraud, that person must have an annual income in excess of $200,000. Conduct covered by the statute includes underreporting income, maintaining illegal offshore accounts, and abusing charitable deductions. The statute also covers smaller claims but the awards in those cases are discretionary.
On July 2, 2019, the Taxpayer First Act was signed into law. The law includes two significant reforms for the tax whistleblower program. First, the law provides tax whistleblowers important protections against retaliation. Second, the law improves communication with tax whistleblowers about the status of their submission.
How It Works
A whistleblower must complete and submit IRS Form 211 to the government. It must be submitted under penalty of perjury. It would be wise to seek representation in submitting this paperwork. The likelihood of the government pursuing the claim depends on the quality, concreteness, and comprehensiveness of the information submitted.The IRS is seeking specific and credible information about substantial fraud. If the IRS determines the allegations may have merit, the IRS will initiate an investigation.
The IRS determines the size of whistleblower awards. Depending on the nature of the information submitted by the whistleblower, the IRS can award a payment of 15% to 30% of the amount that the IRS collects. If the IRS principally relied on other sources to collect the amounts owed, or if the whistleblower planned and initiated the tax fraud scheme, the award is up to 10% of the amount collected. An incentive payment is available only if the IRS pursues the case. If the IRS declines the case, a whistleblower cannot proceed independently with a lawsuit.
Since 2007, the IRS Whistleblower Office has collected more than $5 billion and has made hundreds of whistleblower awards totaling more than $800 million.
Who Can Be an IRS Whistleblower?
Any person who can bring solid information to the IRS that can be used to develop a substantial claim may be a whistleblower. The claim is strengthened if the whistleblower has such documentation as cashed checks, invoices, account numbers, internal audits, and emails. However, this program is not a tipline, nor is it a forum to resolve personal or business disputes.
If you have been witness to these or any other activities that could be considered illegal tax evasion, contact Halunen Law.