What is the IRS Whistleblower Program?
The Internal Revenue Service (IRS) operates a whistleblower program under the authority of 26 U.S.C. 7623. The purpose of the program is to encourage private citizens to report tax cheats and fraudsters to the government. The program applies only when the amount of unpaid taxes in dispute is more than $2,000,000.
A whistleblower who knows of unpaid taxes in an amount greater than $2,000,000 may file an IRS Form 211 with the IRS Whistleblower Office. The IRS Form 211 should provide detailed information about the tax fraud scheme, the unpaid taxes at issue, and the details of the whistleblower’s evidence.
Unlike the False Claims Act, the whistleblower has no power or authority to press the case without the government. The IRS makes the decision alone. The IRS Whistleblower Office evaluates the Form 211 and makes a decision whether to refer the case for further investigation to one of the IRS’s many investigative offices.
If the whistleblower’s information substantially contributes to a decision by the IRS to take an administrative or judicial action against the tax cheat, and that action later results in the collection of tax, penalties interest or other fines, the IRS may pay an award to the whistleblower of at least 15% but not more than 30% of the government’s recovery. The Whistleblower Office can reduce the award if it finds that the whistleblower planned and initiated the actions that led to the underpayment of tax.
By law, the IRS must report to Congress each year on the activities of the IRS Whistleblower Office and the results obtained. In 2013, the IRS Whistleblower Office received more than 9,000 claims filed by whistleblowers. Claims typically remain open for more than a year. In 2013, the IRS paid 122 awards to whistleblowers for a total of approximately $53 million. The average IRS whistleblower award in 2013 was 14.6% of the IRS’s recovery.
IRS whistleblower cases can last for many years and can be very challenging. Because the whistleblower has little power to push the case once it is filed, the whistleblower should take great care and caution at the outset to present the most compelling case possible by way of the IRS Form 211.
Please Note: Rabin Kammerer Johnson provides these FAQs for informational purposes only, and you should not interpret this information as legal advice. If you want advice as to how the law might apply to the specific facts and circumstances of your case, please click here to contact one of our attorneys.