The IRS Whistleblower Program helps boost the “fair and effective enforcement of our nation’s tax laws and the success of our voluntary tax system.” The IRS Whistleblower Program is dependent on people who become aware of tax fraud and tax non-compliance and report that information to the IRS. As per the IRS: “people with firsthand knowledge of non-compliance who are willing to share what they know with us so we can investigate it when warranted.” The IRS Whistleblower Program is of the outmost importance to the IRS given the role that it plays in assisting with tax compliance and narrowing the tax gap. The IRS is dedicated to ongoing enhancements of this vital program and is actively seeking methods to increase awareness among potential whistleblowers.
According to the IRS Whistleblower Office 2023 Annual Report, in fiscal year 2023:
- IRS paid whistleblowers 121 awards totaling $88.8 million attributable to information that resulted in proceeds collected of $338 million.
- The total dollar amount of awards paid increased from FY 2022 when $37.8 million in awards were paid.
- The total number of awards paid in FY 2023, however, decreased from 132 in FY 2022 to 121 in FY 2023.
- Although the number of awards decreased in FY 2023, the number of claims related to those awards was 1,234 in FY 2023 compared to 396 claims in FY 2022.
IRS Whistleblower Program had a Big Win in 2024
On 9/18/24, it was reported that the IRS finalized a $263 million tax fraud settlement with an individual taxpayer. “The $263 million settlement concludes one of the largest tax whistleblower cases ever. By comparison, the IRS collected a total of $338 million from whistleblower cases resulting in 121 awards in fiscal year 2023”. The IRS has not identified the taxpayer that committed the tax fraud but has reported that there where three whistleblowers involved in the case over a five year period that will receive the maximum award allowed in the program of 30% of the IRS recovery.
Getnick Law (one law firm representing the main whistleblower) partner Margaret Finerty stated: “This groundbreaking case illustrates the importance of the IRS whistleblower law and how it empowers private citizens to work with the government to uncover massive fraud committed by powerful individuals and generate significant revenue for the government, benefiting honest taxpayers across the country.” Getnick added, “Together we have demonstrated that when the IRS Whistleblower Program functions as a public-private partnership embracing mutually supportive cooperation, it can produce a win-win-win resolution for the Whistleblower Office, whistleblowers and their counsel, and most importantly, the public.”
Here is what to know about the IRS Whistleblower Program
- Internal Revenue Code (IRC) Section 7623 provides for awards to whistleblowers who submit information to the Internal Revenue Service.
- IRS Whistleblower Office pays monetary awards to eligible individuals whose information is used by the IRS.
- The award percentage depends on several factors, but generally falls between 15 and 30 percent of the proceeds collected and attributable to the whistleblower’s information.
- Awards can only be issued once a final determination can be made, and as such, award payments cannot be made until the taxpayer has exhausted all appeal rights and the taxpayer no longer can file a claim for refund or otherwise seek to recover the proceeds from the government.
- To qualify for the IRC Section 7623 award program, the whistleblower’s information must relate to an action where: Proceeds in dispute exceed $2,000,000; and If the subject of the claim is an individual, the individual’s gross income must also exceed $200,000 for any taxable year subject to such action.
How to submit a whistleblower claim
Individuals must use IRS Form 211, Application for Award for Original Information, and ensure that it contains the following:
- A description of the alleged tax noncompliance, including a written narrative explaining the issue(s).
- Information to support the narrative, such as copies of books and records, ledger sheets, receipts, bank records, contracts, emails, and the location of assets.
- A description of documents or supporting evidence not in the whistleblower’s possession or control, and their location.
- An explanation of how and when the whistleblower became aware of the information that forms the basis of the claim.
- A complete description of the whistleblower’s present or former relationship (if any) to the subject of the claim (for example, family member, acquaintance, client, employee, accountant, lawyer, bookkeeper, customer).
- The whistleblower’s original signature on the declaration under penalty of perjury (a representative cannot sign Form 211 for the whistleblower) and the date of signature.
The IRS Whistleblower Office 2023 Annual Report reports that the ten most common allegations submitted in fiscal year 2023 are:
- Allegation Unreported/Under Reported Income
- Overstated or False Deductions
- Failure to File Tax or Information Return
- General Allegations of Fraud, Tax Fraud, Wire Fraud, Insurance Fraud, etc.
- Employee vs Subcontractor
- Rental Income
- Under Reported Wages/Cash Under the Table
- Capital Gains Tax
- Money Laundering
- International/Offshore Issues
Know this
Individuals participating in the IRS Whistleblower Program ought to understand that a “representative” cannot sign Form 211. The individual making the referral under the Program signs under Penalty of Perjury, declaring that they have examined the application, all accompanying statement and supporting documentation, and, to the best of their knowledge and belief, they are true, correct, and complete. ©
