WHAT IS AN IRS TAX “WHISTLEBLOWER”?
A “whistleblower” is someone who reports misconduct by an employer, co-worker, or another party. For
decades, whistleblowers have assisted the Internal Revenue Service (“IRS”) in identifying and prosecuting tax
law violations. In 2006, under the Tax Relief and Health Care Act, the IRS Whistleblower Office (“WO”) was
created to oversee the IRS whistleblower program, which rewards informants who provide credible information
to the IRS about those who fail to comply with tax laws.
A high-quality whistleblower claim is one that contain all or at least most of the following elements:
(1) Timely;
(2) S knowledgeable/informed whistleblower;
(3) Relevant documents;
(4) Significant dollars; and
(5) Bad actions by the taxpayer.
THE IRS WHISTLEBLOWER PROGRAM AND AWARDS FOR ORIGINAL INFORMATION.
An IRS Form 211 is an application for award for original information, which is essentially an award under
the IRS Whistleblower Program. Under Internal Revenue Code (“IRC”) §7623(b), if the information submitted
by the whistleblower causes the collection of taxes, interests, or penalties, the IRS can typically award the
whistleblower between 15% and 30% of the recovered proceeds. There are two types of whistleblower awards,
and information for the first type of award must meet the following criteria to qualify:
(1) The information must be signed and submitted under penalties of perjury;
(2) The information must relate to an action in which the tax, penalties, interest, additions to tax and
additional amounts in dispute exceed $2 million;
(3) The information must relate to a taxpayer, and for individual taxpayers only, whose gross income
exceeds $200,000 for at least one of the tax years in question.
If a submission does not meet these conditions, it may qualify for the Discretionary Whistleblower Award
Program. This program limits its rewards to a maximum of 15% of the collected proceeds, up to $10 million.
Further, to qualify for a whistleblower award, the whistleblower must submit credible and specified
information about the alleged tax fraud with Form 211. Form 211 must be submitted to the WO and should
include a description of the amounts due, any supporting documentation, how and when you learned about the
information that supports your claim, and a description of your relationship to the taxpayer you are filing a claim
against.
If after reviewing Form 211, the WO decides to further investigate the claim, this process may potentially
take more than 1 year. If the WO collects the amount owed and the matter is closed, then the WO will
determine how much the whistleblower may collect as a reward, which is at least 15% and no more than 30%
of the recovered proceeds, depending on the information contributed and other substantial contributions the
whistleblower made. However, the IRS will not issue an award until a final determination and collection has
occurred.Those interested in filing a claim should keep in mind that awards are based on collected proceeds,
meaning informants usually wait anywhere from 5 to 7 years after filing a claim to receive an award.
STATUTE OF LIMITATIONS.
The statute of limitations (“SOL”) for reporting tax fraud under the Whistleblower Program is 3 years from
the date the fraudulent tax return was filed. However, if the report relates to a tax omission of more than 25%
of the gross income as stated in the filed tax return, the SOL will extend to 6 years. Further. If a fraudulent tax
return was filed with the intent to evade taxes, the SOL is unlimited.
Seeing as this is sensitive information and nothing to toy about, you should always consult with an attorney
before making such a big leap. Should you have any questions, EPGD Business Law is here to help. We can
be reached at any of the following; 786-837- 6787 or info@epgdlaw.com
*Disclaimer: This blog post is not intended to be legal advice. We highly recommend speaking to an attorney if you have any legal concerns. Contacting us through our website does not establish an attorney-client relationship.*
