ATTORNEY NEWSLETTER
How The IRS Whistleblower Program Works
Mandatory vs. Discretionary Rewards
How Whistleblowers Apply For Rewards
Subject to certain thresholds and limitations, the Internal Revenue Service (IRS) rewards people who blow the whistle on corporations and individuals who fail to pay the tax that they owe. Internal Revenue Code (I.R.C.) § 7623. In Fiscal Year (FY) 2023, the IRS paid whistleblowers 121 awards totaling $88.8 million attributable to information that resulted in proceeds collected of $338 million. The 2023 award amount was up from $37.8 million paid in FY 2022. As discussed below, the awards may be mandatory (Section 7623 (b)(1) or discretionary (Section 7623 (b)(2)). Various types of tax fraud may be the basis of an IRS whistleblower application but there are certain threshold requirements for a mandatory reward:
- Tax proceeds (tax plus interest and penalties) in dispute must 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.
I.R.C. § 7623. One primary form of tax avoidance is offshore schemes that shelter income from U.S. taxation. These schemes also often violate other federal laws, including banking law. See, e.g., Reports of Foreign Bank and Financial Accounts Act (FBAR) (31 U.S.C. § 5314); Foreign Account Tax Compliance Act (FATCA) (26 U.S.C. § 1471 et seq.). Evans Law Firm, Inc. represents individuals with credible information of offshore tax avoidance schemes or other tax fraud and can help you submit information of tax fraud and all related violations of the law to the government and present your evidence with a goal toward a reward if the IRS recovers. If you have credible information of tax fraud, call us today at (415)441-8669. Our toll-free number is 1-888-50EVANS (888-503-8267).
Mandatory Versus Discretionary Awards
Under Internal Revenue Code Section 7623, there are mandatory award cases and discretionary award cases:
Mandatory Awards (26 USC § 7623(b)):
The law requires the IRS to give an award of 15 to 30% of the fraud recovery or tax underpayment under section 26 USC § 7623(b), if:
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- The IRS collects tax underpayments resulting from the action or related actions.
- The amount disputed exceeds $2 million (and if an individual and not an entity, the defendant earned at least $200,000 one year in income); and
- The IRS acts upon the tip from a whistleblower.
Discretionary Awards (26 USC § 7623((b)(2):
Even if a case does not meet the criteria for a mandatory award, it is still possible for a whistleblower to receive an award. Discretionary awards are possible for cases “based principally on disclosures of specific allegations … resulting from a judicial or administrative hearing, from a governmental report, hearing, audit, or investigation, or from the news media” taking into account the “significance of the individual’s information and the role of such individual and any legal representative of such individual in contributing to such action.” I.R.C. § 7623(b)(2)(A). The maximum award for discretionary awards is 10 percent of the tax recovery.
How An IRS Whistleblower Case Works
IRS whistleblower cases take a long time; in some instances 10 years or more. But they all start by submitting a Form 211 “Application for Award for Original Information” under penalty of perjury. A whistleblower may not bring an independent action if the IRS decides not to pursue an action. However, the whistleblower may be eligible for an award if the IRS does successfully pursue a judicial or administrative action based upon the information submitted. Where the collected proceeds exceed $2 million or, if the taxpayer is an individual and their gross income exceeds $200,000, the IRS is required to pay an award to the whistleblower, provided other statutory qualifications are met. The range of such an award is typically between 10 percent and 30 percent of the amount collected, as discussed above.
Contact Us
Ingrid M. Evans represents individuals with credible, original information of any kind of tax fraud, including offshore tax avoidance measures, and use of foreign corporations and accounts to avoid taxation or the like. Ingrid can be reached at (415) 441-8669, or by email at <a href=”mailto:info@evanslaw.com”>info@evanslaw.com</a>. Our toll-free number is 1-888-50EVANS (888-503-8267). Ingrid also handles whistleblower actions under the Financial Reform, Recovery, and Enforcement Act (FIRREA/FIAFEA), the Commodities Futures Trading Commission Whistleblower Program, the Securities and Exchange Commission Whistleblower Program, False Claims Act cases, the FINRA Whistleblower Office and the California False Claims Act.
