Discover How Reporting Tax Fraud Could Earn You Millions Through the IRS Whistleblower Program
When you witness tax fraud or evasion, you’re not powerless to act. The IRS Whistleblower Office administers claims for awards from people who report specific, timely and credible information about noncompliance with tax laws. The office pays monetary awards to eligible individuals whose information is used by the IRS. The award amount generally is 15 to 30% of the proceeds collected and attributable to the whistleblower’s information. In fact, in fiscal year 2024, the IRS paid awards totaling approximately $123 million based on tax and other amounts collected of approximately $475 million attributable to whistleblower information.
Understanding the IRS Whistleblower Program
On December 20, 2006, Section 406 of the Tax Relief and Health Care Act of 2006 added IRC section 7623(b), which enacted significant changes in the IRS award program for whistleblowers. The TRHCA 2006 set a new framework for the consideration of whistleblower submissions and established the Whistleblower Office within the IRS to administer that framework. This program has proven remarkably successful, with the IRS Whistleblower Office collecting over $7 billion from non-compliant taxpayers since issuing the first award in 2007 through June 2024, and paying awards totaling over $1.2 billion.
The program operates on two tiers. To be eligible for an award, whistleblowers must provide specific and credible evidence that a taxpayer is avoiding or underpaying a tax obligation to the federal government, whether fraudulently or otherwise, and that information must substantially contribute to the government’s recovery of at least $2 million, including interest and penalties. For individual taxpayers, the income of an individual taxpayer who owes tax that has been reported under this program must exceed $200,000 in the year the tax was due.
Recent Success Stories Demonstrate Program’s Impact
The program’s effectiveness is evident in recent high-profile cases. Three whistleblowers helped the IRS recover $263 million from a single individual, who lawyers say ran an offshore tax evasion scheme for more than a decade. The three whistleblowers will receive 30 percent of the government’s recovery, the maximum possible award, a reflection of the importance of the information and assistance provided to the government.
Because whistleblower rewards are only available when the amounts recovered are substantial, most successful claims have involved large tax avoidance schemes, corporate tax fraud, and fraud by high net worth individuals. The potential rewards are substantial, with no cap on the size of the reward, so for example, a whistleblower who reports a billion dollar underpayment of tax (including penalties and interest) could result in an award payment of up to three hundred million dollars.
The Critical Role of Form 211
To participate in the program, whistleblowers must complete and submit IRS Form 211, Application for Award for Original Information, to the IRS Whistleblower Office in Ogden, Utah, with the whistleblower’s original signature signed under penalty of perjury. This form requires detailed information, including the taxpayer’s name, address, taxpayer identification number, and the taxpayer’s date of birth or approximate age.
The form requires you to indicate the type of tax that has not been paid or the tax liability that has not been reported and describe the alleged violation. You must explain why you believe the act described constitutes a violation of the tax laws and attach all supporting documentation to substantiate the claim. Space is limited on the Form 211 so the IRS encourages the use of separate attachments. Do not try to jam all of your information on this form. Rather, a carefully crafted and organized submission with a Form 211 and attached memorandum of facts and law with supporting exhibits is crucial to the success of your tax whistleblower claim.
Protecting Whistleblower Identity and Rights
While IRS whistleblowers must disclose their identities to the IRS when making a submission, the submission may be delivered in secret. The IRS has a strong policy to protect the whistleblower’s identity. The agency has generally been cooperative in taking steps to ensure that the targeted taxpayer does not learn that there is a whistleblower, much less that person’s identity.
Additionally, employers are prohibited from retaliating against employees for reporting any sort of tax non-compliance, fraud, or other violations, or assisting the IRS in an investigation. This means they may not discharge, demote, suspend, threaten, harass, or in any other manner discriminate against an employee in the terms and conditions of employment for doing what’s legally right.
The Importance of Legal Representation
Experienced whistleblower attorneys can help whistleblowers submit stronger claims, connecting the whistleblower’s evidence with the applicable law. Such a well-documented submission will have better chances of success – both in encouraging IRS officials to investigate the fraud and in obtaining the largest possible rewards. Though the IRS Whistleblower Program does not require a whistleblower to have a lawyer, in practice it is highly recommended that the person hire a qualified lawyer who can help compile the evidence and draft the IRS Form 211. Thorough research should be done and careful consideration should be given to the selection of an attorney as the work by that attorney will be essential to the success of the IRS whistleblower case and will be a major factor in determining the amount of the reward.
When seeking legal representation for whistleblower matters, consider consulting with a whistleblower lawyer Manhattan, NY who understands the complexities of these cases. The Howley Law Firm focuses on representing individuals in the areas of employment rights in New York and whistleblower rewards nationwide. With two experienced attorneys and a keen eye for quality, their small law firm is able to dedicate more one-on-one time to their hand-picked clients. They give individuals the same high-quality legal representation that corporations have. For 20 years, they’ve represented companies such as Pfizer, Texaco, Citibank, and Sony as a partner in a large corporate law firm. They worked with the smartest lawyers in the country and argued in the U.S. Supreme Court.
Understanding the Process and Timeline
The IRS maintains that strict tax privacy laws prevent it from disclosing what actions it has taken on a whistleblower submission or the status of any investigation. Typically, a whistleblower may be interviewed only once by the IRS, and may receive no further information until the IRS has either decided not to pursue collection or reached an agreement for payment of taxes. The Whistleblower Office will say only if the case is still open or has been closed.
It’s important to understand that tax underpayment must be reported within three years of the filing of the incorrect tax return, or six years if the tax return understates income by at least 25%. If the taxpayer intended to commit tax fraud, however, this time is extended indefinitely.
Taking Action Against Tax Fraud
Our nation’s tax system is built on the principle of voluntary compliance: taxpayers file tax returns and pay their taxes on time and accurately. The IRS addresses non-compliance with tax laws through examinations, collection activities, criminal investigations, data analytics and other methods, but they can’t detect it all by themselves. They need help from whistleblowers—people with firsthand knowledge of non-compliance who are willing to share what they know with them so they can investigate it when warranted.
If you have knowledge of significant tax fraud or evasion, the IRS Whistleblower Program offers a legitimate path to both serve the public interest and potentially earn substantial financial rewards. The first rule when filing Form 211 is to not guess, do not speculate, one must be careful when making allegations and accusing people of fraud. These are serious allegations. It is critical that a whistleblower is conservative in this sense and only makes allegations of which they are extremely confident as to their veracity. With proper legal guidance and thorough documentation, whistleblowers can play a crucial role in ensuring tax compliance while protecting their own interests throughout the process.