A “whistleblower” is someone who reports misconduct by an employer, co-worker, or another party. For decades, whistleblowers have assisted the Internal Revenue Service in identifying and prosecuting tax law violations.
In 2006, under the Tax Relief and Health Care Act, the IRS Whistleblower Office 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. As long as some conditions are met, these rewards can be worth anywhere from 15 to 30 percent of the proceeds collected through a whistleblower’s assistance and information.
According to the IRS, 2016 was a “transformative” year for its Whistleblower Office. Since 2011, the number of whistleblower claims submitted to the IRS has for the most part steadily increased, creating a sizeable claim backlog. Last year, the IRS decided to streamline its claims process and to deploy resources from across the agency to help address this backlog, and as a result closed more than 21,000 open claims, which is a 99% increase from 2015. Last year, the IRS also, through its Whistleblower Office, collected approximately $369 million in proceeds, and made 418 awards totaling about $61 million.
High quality whistleblower claims are ones that contain all or at least most of the following elements: 1) timely; 2) a knowledgeable/informed whistleblower; 3) relevant documents; 4) significant dollars; and 5) bad actions by the taxpayer.
To those interested in filing a claim with the IRS Whistleblower Office, there are two types of awards. Information for the first type of award must meet the following criteria to qualify. First, it must be signed and submitted under penalties of perjury. Second, it must relate to an action in which the tax, penalties, interest, additions to tax and additional amounts in dispute exceed $2 million. Lastly, it 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.
Those interested in filing a claim should keep in mind that awards are based on collected proceeds, meaning informants usually wait anywhere from five to seven years after filing a claim to receive an award.
Informants should use IRS Form 211 to make a claim. Claims 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 needed, a tax advisor can assist in filing your claim.
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 firstname.lastname@example.org