IRS Whistleblower Program

The aim of the IRS Whistleblower Program, established under 26 U.S.C. §7623, is to focus law enforcement efforts on detecting tax fraud. To achieve this objective, the program offers monetary rewards of up to 30% of the total amount retrieved in tax enforcement proceedings to those who provide reliable evidence of tax fraud to the IRS.

To file a claim with the IRS Whistleblower office, IRS forms include:

Form 3949-A: To report a business or individual.

Form 14157: To report a tax preparer whom you suspect of fraud, or an abusive tax scheme by a tax return preparer or tax preparation company.

Form 14242: To report someone is promoting or engaging in an abusive tax-avoidance scheme.

Form 13909: To report a tax-exempt organization such as a church, charity or trade association.

The aforementioned forms require:

• a thorough and accurate account of the alleged violation, including the facts relevant to the incident;
• an explanation of why it violates tax laws;
• how the information was obtained; and
• the amount owed by the alleged violator.

It is crucial that all supporting documentation and evidence are included with the completed form and that it is submitted with the understanding that it is done so under penalty of perjury.

The IRS does not disclose the whistleblower’s identity nor reveal their name when granting the whistleblower an award. In cases where revealing the whistleblower’s identity is deemed necessary for the investigation to continue, the IRS will first consult with the whistleblower before deciding on further action.

Additionally, an attorney can file on your behalf if you wish to remain completely anonymous.

To be eligible, you must submit specific and credible information about tax fraud by filling out IRS Form 211, an application for Award for Original Information.

Eligibility for an award under the IRS whistleblower program is not restricted to U.S. citizens. However, certain qualifications must be met, including providing credible and specific information that leads to the collection of taxes, penalties, interest, and other disputed amounts exceeding $2 million. In cases where the disputed amount is less than $2 million, or an individual’s gross income is below $200,000, the IRS may still grant up to 15% of the collected amount to the whistleblower. The same percentage is also awarded to whistleblowers who provide credible information of tax fraud that leads to the collection of funds from an individual. whose annual gross income exceeds $200,000.

The rules governing these payments are codified at §7623 of the Internal Revenue Code.

Yes.  Even if the whistleblower played a key role in the tax fraud, they can be a whistleblower and receive an award.

No. The False Claims Act is a distinct statute designed to address fraudulent payment claims submitted to the federal government. It encompasses activities that involve submitting inaccurate information regarding product quality or cost to the government, as well as billing Medicare for services that were not needed or were never provided. Whistleblowers who choose to file claims under this Act stand to receive anywhere from 15% to 30% of the recovered dollar amount.

No. The Dodd-Frank Wall Street Reform and Protection Act of 2010 is a separate whistleblower statute that covers securities law violations. If whistleblowers report any violations, such as insider trading, money laundering, or Foreign Corrupt Practices Act violations, they may receive a reward if the SEC or any other government authority recovers more than $1 million based on that information. Additionally, the CFTC also has a similar whistleblower reward program established by the Dodd-Frank Act.

Upon submission of IRS Form 211 by a whistleblower, the IRS initiates an investigation to determine the viability of the case. The evaluation hinges primarily on the type of fraud reported, the strength of evidence presented by the whistleblower, and the amount of money implicated in the allegations.

During the investigation, the IRS refrains from providing updates on the case and will only confirm if it is still open or closed in response to inquiries. Upon conclusion of the investigation, the IRS informs the whistleblower if they are entitled to an award and specifies the amount. In cases involving sums exceeding $2 million or an individual earning over $200,000 in gross income, if the whistleblower does not receive an award, they may appeal to the U.S. Tax Court.

In conclusion, the entire process may require several years to conclude, and the payment of awards is contingent on the IRS securing all the money owed under the claim.