Whilst whistleblowing never pays off, there’s one particular case where whistleblowing could pay off considerably. The Internal Revenue Service (IRS) is not only focused on collecting taxes, but the IRS is willing to pay Americans thousands or even millions of dollars for assisting with uncovering tax fraud. As per the IRS Whistleblower Program, individuals who can give credible and detailed information about citizens evading tax could earn between 15% and 30% of the amount the IRS collects as a result of their tips. While the reward is great, many Americans remain clueless about this program, yet they have valuable information that allows them to qualify for the compensation.
More about the IRS Whistleblower Program
The IRS Whistleblower Program was created under the Tax Relief and Health Care Act of 2006, so that whistleblowing on tax fraud could become more structured and rewarding. While earlier whistleblower efforts failed, the revamped program ensured that compensation could be guaranteed if certain conditions were met.
Whistleblowers who wish to qualify for a reward must submit Form 211 to the IRS with credible information of an individual or business that underpaid taxes by at least $2 million. The submitted form does not only make mention of taxes only, but it is also related to penalties and interest too.
When reporting individual taxpayers, the rule is that the taxpayer should have earned at least $200,000 in gross income for the year in question. When the IRS uses the provided information to redeem unpaid taxes, the whistleblower could be eligible to receive15% to 30% of the total collected amount, based on the quality and usefulness of the evidence provided. The reward for whistleblowers is only paid when the IRS manages to collect the money and all legal appeals and refund windows have closed completely. While the IRS Whistleblower Program is rewarding, the process to receive rewards could take years.
How can a whistleblower be successful?
While whistleblowing is rather successful when large scale tax evasions get reported such as fraudulent deductions or even hidden offshore accounts, Americans can also file tips if they experience tax violations in the workplace. Although the IRS has warned citizens not to ignore IRS tax bills many still choose to ignore tax bills.
Whistleblowers are most likely to be successful in cases when:
- Documentation such as emails, financial records, or internal reports can be provided.
- Credible and timely information is provided within 3 years of tax filing (or 6 years in terms of underreporting cases).
- Great financial stakes are involved and where the IRS is likely to pursue law enforcement action.
While IRS privacy laws prevent the agency from disclosing much to whistleblowers during the investigation, the IRS will notify claimants when their case is closed and will state whether a reward is being issued.
According to the IRS official website, whistleblowers are unable to independently sue under the program even if the IRS chooses not to act.
Few things to note prior to whistleblowing
Most whistleblowers are enticed into whistleblowing as it comes with a possibly huge reward. However, there are some complexities that make whistleblowing harder such as the need to ensure that all submissions are accurate, well-documented, and submitted through the right process. Sometimes citizens should look at roping in a whistleblower attorney when potentially high-value claims are involved.
Whistleblowers need to know:
- Whistleblowers need not be U.S. citizens to gain a reward.
- Identity should not be disclosed. however, it can be revealed if and when the IRS takes the case to court.
- Whistleblowers are protected from employer retaliation according to federal law.
- Whistleblowers can disagree with the amount awarded by appealing to the U.S. Tax court.
Citizens must remember that the IRS is watching their bank accounts regularly, so they should avoid engaging in suspicious transactions to evade tax payments. The IRS Whistleblower program offers all the more reason for citizens to report others who try to bypass their tax payments.
