With a revised IRS law, whistleblowers will be acknowledged and rewarded for their courage in bringing an end to tax fraud. In December 2006, the IRS amended its whistleblower statute to encourage reporting of tax fraud perpetrated by corporations and individuals. Like the False Claims Act, the statute requires the IRS to pay to whistleblowers a minimum of 15% and a maximum of 30% of the proceeds collected from the whistleblower’s information.
If the IRS fails to acknowledge a whistleblower’s contribution, the whistleblower may appeal the reward amount to the U.S. Tax Court. A whistleblower’s identity will generally be kept confidential by the IRS throughout the investigation and case.
The statute also imposes a minimum threshold: the total amount of tax fraud, including interest and penalties, must exceed $2 million. In the case of a fraudulent individual taxpayer, that taxpayer’s gross income must exceed $200,000.
How is the IRS program different from the False Claims Act?
Similarities with the False Claims Act:
- Enforceable right to reward: both laws grant the whistleblower an enforceable right to receive a reward with defined percentage ranges.
- Scope of reward: both laws define the reward to cover related actions and all penalties, interests and other related amounts.
- First to file: both laws grant the reward to the first whistleblower who provides relevant information to the government.
- Consequences of involvement: both laws may reduce the reward if the whistleblower was involved in the fraudulent misconduct and may give no reward if the whistleblower is criminally charged.
Differences from the False Claims Act:
- Threshold dollar requirements: the IRS whistleblower statute requires a minimum amount of $2 million in tax fraud, and an additional $200,000 in gross income for actions against individuals.
- Sworn submission: the IRS statute requires the whistleblower to submit his or her information under penalty of perjury.
- Not a qui tam case: the IRS statute does not allow the whistleblower to carry out an action on behalf of the government, only to provide the information to government officials.
- No continued involvement: the IRS statute does not require the whistleblower to continue to be involved in the investigation or case, although the percentage of the whistleblower reward may be diminished by a lack of participation by the whistleblower.
- Public Disclosure is not a jurisdictional bar: the IRS statute may reduce the reward, but may not disqualify the whistleblower if he or she is not the original source of the information.
- No treble damages: the IRS statute does not directly provide for treble damages, but allows the reward to be based on all penalties, interest and additional amounts.
How do I know if I have a case?
Contact our firm for a free, confidential consultation to evaluate your case. To make the most of your call, have the following information ready, if known:
- What federal tax requirement did the taxpayer fail to meet?
- What misinformation was provided to the IRS to hide the taxpayer’s conduct?
- What information or evidence do you have to show that the taxpayer knew the misinformation would result in avoiding or reducing a tax obligation?
- How much would the taxpayer owe to the IRS if honest information had been reported?
