As long as there have been taxes, there have been taxpayers who try to avoid them. But there is a big distinction between legitimate strategies to keep taxes to a minimum and illegal efforts that constitute tax fraud or tax evasion. Every year, corporations and individuals engage in a range of illegal tactics that defraud the federal government of billions of dollars in owed taxes.
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Common Examples of Tax Fraud & Evasion
What Is the IRS Whistleblower Reward Program?
Does the IRS Whistleblower Program Have Incentives?
Applicable Details About Submissions
Can a Tip Be Submitted to the IRS Anonymously?
Who Is Eligible for an IRS Whistleblower Reward?
How Rewards Are Determined
How Are Whistleblowers Protected Against Retaliation?
Typically, IRS Whistleblower Claims Have a Low Success Rate
Youman & Caputo’s Unique Approach to IRS Whistleblower Claims
Speak to a Lawyer Today
Given the complexity of the tax code, there are many illegal ways to try to evade tax obligations. Some of the most common examples of tax fraud and tax evasion include:
Any action that involves intentionally misleading the Internal Revenue Service (IRS) or tax authorities to reduce the amount of taxes owed constitutes tax fraud or evasion.
The Internal Revenue Service conducts investigations into potential cases of tax fraud, but it does not have the resources to find and stop every violation. While the IRS has agents, accountants, and lawyers whose job it is to uncover fraud and collect unpaid taxes, there are more instances of illegal tax avoidance than they can track.
That is why the IRS provides private citizens with financial incentives to report significant cases of tax fraud and tax evasion to the government. The IRS encourages the public to come forward with original knowledge regarding potential tax underpayments to decrease its annual losses associated with tax evasion, which are estimated to be as high as $450 billion. The IRS does so by offering monetary awards for credible, actionable tax fraud tips submitted by whistleblowers that result in a significant recovery by the IRS.
The purpose of the IRS Whistleblower Reward Program is to recover fraud losses resulting from tax law violations. The program provides financial incentives to individuals who report tax evasion and other forms of tax fraud if these tips result in successful action taken by tax authorities. The IRS Whistleblower Program can pay rewards to individuals who report significant tax fraud schemes by corporations or high net-worth individuals.
According to the most recent IRS Whistleblower Office – Annual Report to Congress, (Publication 5241 (Rev. 6-2023) (irs.gov)), the IRS paid more than $37 million in awards to whistleblowers in Fiscal Year 2022.
Yes. The IRS Whistleblower Office pays monetary awards to people who provide original information that the IRS uses to take successful enforcement action (criminal or civil) against someone guilty of tax law noncompliance. Under 26 U.S. Code, Section 7623, the IRS must award eligible tax whistleblowers with 15 to 30 percent of the proceeds collected from tax fraud cases under the Whistleblower Reward Program where the proceeds collected (including unpaid taxes, interest and penalties) amount to at least $2 million.
IRS Whistleblower Reward Program incentives are mandatory for people who provide specific and credible information regarding violations of Internal Revenue laws that result in $2 million in collected “proceeds,” which are not only limited to unpaid or underpaid taxes. Proceeds can also refer to penalties, interest and proceeds arising from “laws for which the IRS is authorized to administer, enforce or investigate,” under the Bipartisan Budget Act of 2018. Proceeds can include any criminal fines and civil forfeitures.
As the IRS Whistleblower Office notes, it is looking for “solid information, not an ‘educated guess’ or unsupported speculation.” To be eligible for an award, whistleblowers must provide credible and specific information that leads to the collection of unpaid taxes, penalties or other proceeds from a noncompliant taxpayer.
The alleged fraud also must involve a significant federal tax issue; the Whistleblower Program is not a means of “resolving personal problems or disputes about a business relationship.” For example, for cases involving an individual, the taxpayer’s income must be more than $200,000 for at least one of the tax years in question for a whistleblower to be rewarded for a successful tip.
To obtain an IRS Whistleblower Award, an individual must file a formal claim by completing and submitting Form 211: the Application for Award for Original Information. The completed document must be accompanied by a signed declaration under penalty of perjury and mailed to:
Internal Revenue Service
Whistleblower Office – ICE
1973 N Rulon White Blvd
Ogden, UT 84404
Any individual who reports information that leads the IRS to recover at least $2 million in unpaid taxes, interest, and penalties is entitled to receive an award of between 15 percent and 30 percent of the amount recovered. IRS Whistleblower claims are filed confidentially and, if the claim is successful, the IRS does not identify award recipients.
Yes. However, unlike other federal whistleblower programs, such as the SEC Whistleblower Program and CFTC Whistleblower Program, the IRS Whistleblower Program does not expressly authorize tax whistleblowers to submit tips anonymously and remain eligible for an award. Despite this, the IRS is dedicated to protecting whistleblowers’ identities to the fullest extent permitted by law, although if a case goes to court, the IRS may not be able to protect the whistleblower’s identity.
To qualify for the IRS Whistleblower Reward, an individual must provide information related to a tax code violation which results in a recovery of collected proceeds by the IRS of at least $2 million. Proceeds can include all money obtained by the IRS with a successful tax evasion action, including interest and penalties.
IRS Whistleblower Program eligibility requirements include:
Previously, there was a $10 million cap on whistleblower awards, but this has been removed. If a tip meets these requirements, an award is mandatory. The IRS must pay the qualifying individual a percentage of the overall proceeds attained, which could lead to a substantial payout, depending on the value of the case.
If a tip submission meets the criteria for consideration and results in proceeds recovered by the IRS, the whistleblower will be rewarded an amount deemed appropriate by the IRS. In general, the IRS will pay at least 15 percent but no more than 30 percent of all proceeds attributable to the submission of the tip.
According to the most recent IRS Whistleblower Office – Annual Report to Congress, (Publication 5241 (Rev. 6-2023) (irs.gov)), the average award percentage in Fiscal Year 2022 was 21.9% of collected proceeds.
According to federal law, when all eligibility requirements are met, individuals can receive awards based on proceeds collected as a result of the action or from any settlement that arises from the action. The percentage of the award will be determined based on considerations such as:
Several factors can either increase or decrease a whistleblower’s assigned reward percentage according to the specific circumstances of the case. The Whistleblower Office will consider all relevant factors to determine whether an award will be paid and, if so, an appropriate award amount to give. The Internal Revenue Service ultimately has discretion over how much to award a tax whistleblower for reporting tax code violations.
Federal law has provisions in place to prevent an employer from retaliating against a tax whistleblower. According to 26 U.S.C. Section 7623(d), “no employer or agent of an employer may discharge, demote, suspend, threaten, harass or in any other manner discriminate” against an employee who lawfully reported tax law noncompliance to the IRS or a tax authority.
Any whistleblower who provides information to assist in an IRS investigation regarding the underpayment of taxes is protected from retaliation by law. If you have suffered retaliation from an employer for reporting potential tax law violations, including job termination or demotion, contact an attorney at Youman & Caputo for assistance filing a retaliation claim.
Even when extensive credible evidence is presented, the IRS conducts an extensive investigatory process and engages in multiple levels of review – which means that award decisions often take five years or longer.
As a result, many whistleblower lawyers who handle these claims do not invest the time or resources necessary to maximize the chances of obtaining compensation.
At Youman & Caputo, we take a unique approach to IRS whistleblower claims in order to help our clients obtain the maximum compensation. We are highly selective about the cases we accept, generally limiting them to tax loss to the government of at least $10 million.
With the assistance of a retired IRS criminal agent consultant, we proactively reach out to the IRS and the Department of Justice to provide our client’s information. If the case is promising, this approach often results in the IRS or DOJ meeting with our client at a very early stage.
We then remain in close contact with government lawyers and agents throughout their investigation, increasing the chances of a positive outcome. To learn more about how our attorneys will address your case, visit our “whistleblower team” webpage.
Our IRS whistleblower lawyers have represented clients reporting tens of millions of dollars in tax fraud to the IRS and have successfully obtained substantial compensation for those who report tax fraud and tax evasion.
If you are aware of such conduct and want to learn more about the IRS Whistleblower Program and how we can help you obtain compensation for exposing tax fraud, please contact us to schedule a free consultation.