Whistleblower Claims – Reporting Tax Cheats

The IRS Whistleblower Office pays money to people who blow the whistle on persons who fail to pay the tax that they owe. If the IRS uses information provided by the whistleblower, it can award the whistleblower up to 30 percent of the additional tax, penalty and other amounts it collects.

For almost 150 years, the IRS has had authority to pay rewards to whistleblowers. The initial reward was a minimum of 1% of the amount recovered from the taxpayer, maximum of 15%, and a cap of $10 million. In the Tax Relief and Health Care Act of 2006, Congress introduced legislation, which enhanced the whistleblower rewards as well as created a whistleblower office within the IRS.

On December 13, 2010, the Whisleblower Office submitted its annual report to Congress, and indicated that it received more than 5000 cases in fiscal year 2009, 460 of which will likely qualify for an award.

The rewards that are available can be large. To be eligible for the larger reward, the tax, penalties, interest, additions to tax, and additional amounts in dispute must be more than $2 million for any taxable year and, if the taxpayer is an individual, the individual’s gross income must exceed $200,000 for any taxable year at issue.

While the award is mandatory, the amount is somewhat discretionary. By statute the amount of award will be at least 15%, but no more than 30%, of the collected proceeds in cases in which the IRS determines that the information submitted by the informant substantially contributed to the collection of tax. The amount of the award can be reduced if the whistleblower was involved in the noncompliance. If the whistleblower is convicted of criminal conduct arising from his or her role in planning and initiating the action, the Whistleblower Office will deny the award.

On June 18, 2010, the IRS added new provisions to the Internal Revenue Manual (IRM) applicable for the whistleblower program. Topics include the following:

25.2.2 Whistleblower Awards
25.2.2.1 Overview: Authority and Policy
25.2.2.2 General
25.2.2.3 Submission of Information for Award under Sections 7623(a) or (b)
25.2.2.4 Initial Review of the Form 211 by the Whistleblower Office
25.2.2.5 Grounds for Not Processing Claims for Award
25.2.2.6 Processing of the Form 211 7623(a) Claim for Award
25.2.2.7 Processing of the Form 211 7623(b) Claim for Award
25.2.2.8 Whistleblower Award Administrative Proceeding
25.2.2.9 Award Computation
25.2.2.10 Appeal Rights under section 7623(b)
25.2.2.11 Confidentiality of the Whistleblower
25.2.2.12 Funding Awards
25.2.2.13 Award Payment Procedures
25.2.2.14 Annual Report to Congress

Read more about how you file a claim by clicking here.