The IRS has instituted a strong whistleblower reward program to help ensure that businesses and wealthy taxpayers pay the amounts they owe. Under this program, a person who reports serious tax underpayments to the IRS can be eligible to receive a significant percentage of the amount the IRS recovers from the taxpayer. To qualify for the program, the total debt to the IRS must exceed $2 million, including interest and penalties. In the case of a violation by an individual, that individual’s gross income must also exceed $200,000 for each taxable year.
How does the IRS whistleblower program work?
The person reporting tax fraud to the IRS is guaranteed at least 15% of the IRS’s proceeds from prosecuting or settling the tax fraud if:
- They provide relevant information to the IRS whistleblower office using IRS Form 211;
- The fraud has not been previously reported;
- The IRS actually uses the information to prosecute or settle the tax fraud; and
- The person makes the report within three years of the filing of the incorrect tax return, or six years if the tax return understates income by at least 25%. There are no time limits on claims if a false tax return was filed with the intent to commit tax evasion.
What can I report to the IRS to receive a reward under the whistleblower law?
You can blow the whistle on any underpayment of taxes, intentional or not. However, only reports of underpayments of taxes of over $2 million are automatically eligible for the program. For lesser amounts, any reward is at the sole discretion of the IRS. Common methods of illegal tax avoidance include underreporting of income, overstating of deductions, hiding of assets, false recordkeeping, keeping multiple sets of books, misusing trusts, stock fraud, or improperly shifting assets offshore to avoid tax.
How can I become an IRS whistleblower?
To maximize your reward, it’s best to obtain a paper trail of the tax fraud (without breaking the law yourself). If you are partially responsible for the fraud, it’s very important to protect yourself legally when reporting the complaint: the IRS will most likely discover your role, so legal advice is critical to protecting yourself and ensuring you obtain any reward due to you. Declarations to the whistleblower office are given under penalty of perjury, so accuracy is important as well.
Are IRS whistleblowers protected from retaliation?
Yes. In July 2019, the Taxpayer First Act (TFA) became law. The TFA made crucial reforms to the Internal Revenue Service (IRS) Whistleblower Program by creating anti-retaliation protections for whistleblowers who file claims under the IRS Whistleblower Program or report tax violations to their employers. These protections include the right to reinstatement and compensatory damages, as well as protections from forced arbitration. The TFA provides for administrative review, but with the right to go to federal court for a jury trial. These protections apply to whistleblowers who disclose actual fraud, as well as whistleblowers who make a mistaken but reasonable complaint of fraud. Under this law, whistleblowers have 180 days to file a claim.
Additionally, the TFA seeks to ensure better and timelier communications between whistleblowers and the IRS. The Act directs the IRS to be more transparent with whistleblowers about the status of their submissions, whether their tips are being investigated, or whether the taxpayer they identified has made a tax payment.
These increased protections against retaliation and commitment to transparency should help encourage more whistleblowers to speak up if they witness tax fraud or have reason to believe there is fraudulent conduct. If you believe your employer has retaliated against you, you should contact an attorney to discuss your matter as soon as possible.
Why hire Katz Banks Kumin for your IRS whistleblower case?
The decision to report corporate or individual tax fraud to the Internal Revenue Service (IRS) has many ramifications, and should only be made with competent legal advice. There are legal protections against retaliation and to preserve anonymity, but only an attorney who is familiar with the IRS whistleblower program can explain how the law applies to your situation and advise you on what steps to take to preserve your rights. If you have information about tax fraud that you’re considering reporting to the government, contact the experienced lawyers at Katz Banks Kumin for an initial consultation with no further obligation.