IRS Whistleblower FAQ
1. What is the goal of the IRS Whistleblower Program?
The goal of the IRS Whistleblower Program, codified at 26 U.S.C. §7623, is to direct law enforcement attention to tax fraud. To that end, the IRS Whistleblower Program provides awards of up to 30% of the amount recovered in tax enforcement actions to individuals who provide credible evidence of tax fraud to the IRS.
2. How do you file an IRS whistleblower case?
All IRS whistleblower cases must be filed by filling out IRS Form 211, the application for Award for Original Information. IRS Form 211 requires a whistleblower to:
- state the facts pertinent to the alleged violation;
- explain why the act constitutes a violation of the tax laws;
- describe how he or she learned of or obtained the information that supports the claim; and
- describe the amount owed by the alleged violator.
The completed form, along with evidence or other documentation supporting the case, must be submitted under penalty of perjury to the IRS Whistleblower Office. Robbins Geller can assist whistleblowers in preparing the necessary documents.
3. Who is eligible for an award?
In order to be eligible for an award, you must submit specific and credible information about tax fraud by filling out IRS Form 211, an application for Award for Original Information. You do not need to be a U.S. citizen to receive an award under the IRS whistleblower program.
If a whistleblower provides specific and credible information leading to the collection of taxes, penalties, interest, and other amounts in dispute in excess of $2 million, and a few other qualifications are met, the IRS will pay the whistleblower 15% to 30% of the amount collected. The same amounts are paid to a whistleblower who provides specific and credible information of tax fraud leading to the collection of money from an individual whose annual gross income exceeds $200,000. The rules governing these payments are codified at §7623(b) of the Internal Revenue Code.
Where the amounts in dispute are less than $2 million (or, for cases that deal with an individual, the individual’s gross income is less than $200,000), the IRS may award up to 15% of the amount collected. The rules governing these payments are codified at §7623(a) of the Internal Revenue Code.
4. Can a whistleblower file an IRS whistleblower case anonymously?
No. But IRS privacy laws are very strict and keep the IRS from disclosing the existence of whistleblowers or naming them upon settlement of the case. If revealing the whistleblower’s identity is essential to continue an investigation, the IRS will inform the whistleblower before deciding whether to proceed.
5. Can someone who was part of the scheme to defraud the IRS receive an award for being a whistleblower?
Yes. Even if the whistleblower played a key role in the tax fraud, he can be a whistleblower and receive an award.
For example, a person convicted for his role in helping U.S. taxpayers evade their tax liabilities blew the whistle on the bank he worked for. His IRS whistleblower case led to the recovery of $780 million in penalties from the bank and the whistleblower received a $104 million award.
6. Does the IRS Whistleblower Program cover fraudulent claims for payment submitted to the federal government?
No. There is a separate whistleblower statute, the False Claims Act, which covers fraudulent claims for payment submitted to the federal government. The False Claims Act covers activities such as filing false information regarding the quality or cost of products sold to the federal government and billing Medicare for services that were not provided or were unnecessary.
Whistleblowers who file complaints under the False Claims Act may receive 15% to 30% of the dollar amount recovered. For more information on how the firm can assist you in False Claims Act whistleblower actions, please see our False Claims Act section.
7. Does the IRS Whistleblower Program cover securities fraud?
No. There is a separate whistleblower statute that covers securities law violations known as the Dodd-Frank Wall Street Reform and Protection Act of 2010 (“Dodd-Frank Act”).
Whistleblowers who report securities law violations – from insider trading to money laundering to violations of the Foreign Corrupt Practices Act – will receive a reward if the SEC or any other government authorities recover more than $1 million based on that information. The Dodd-Frank Act establishes a similar whistleblower reward program for the CFTC. For more information on how the firm can assist you in these whistleblower actions, please see our securities whistleblower section.
8. Does the IRS Whistleblower Program cover government mismanagement or inefficiency?
No. While the government may lose millions of dollars each year through waste and mismanagement, as well as the waste and mismanagement of outsiders (e.g., government contractors) or bureaucratic inefficiencies, the IRS Whistleblower Program does not provide a remedy for mismanagement or inefficiencies.
9. What happens when a person uncovers or detects tax fraud?
Once a person has evidence of fraud against the government and decides to blow the whistle, that person should find a lawyer who is experienced in representing whistleblowers. Though the IRS Whistleblower Program does not require a whistleblower to have a lawyer, in practice it is highly recommended that the person hire a qualified lawyer who can help compile the evidence and draft the IRS Form 211. Thorough research should be done and careful consideration should be given to the selection of an attorney as the work by that attorney will be essential to the success of the IRS whistleblower case and will be a major factor in determining the amount of the reward.
10. What happens when an IRS whistleblower case is filed?
After a whistleblower submits IRS Form 211, the IRS will investigate to determine if the case is worth pursuing. This determination will be based, in large part, on the nature of the fraud alleged, the quality of evidence presented by the whistleblower, and the alleged amount of money at issue.
While the investigation is pending, the IRS will not communicate about the progress of the case and will not respond to inquiries other than to state whether the case is still open or has been closed. If a case is closed and the IRS has determined that the whistleblower qualifies for an award, the IRS will inform the whistleblower of that fact and the amount of the award. If the whistleblower does not receive an award in a case involving more than $2 million or an individual with more than $200,000 in gross income, the whistleblower may appeal the award denial to the U.S. Tax Court.
All told, the process may take many years. Awards will only be paid after the IRS has collected all money it is due under the claim.
Robbins Geller Rudman & Dowd LLP is committed to fighting for our whistleblower clients in their courageous efforts to combat fraud. We are dedicated to ensuring that our clients receive the compensation and protection they deserve. If you are aware of any securities, commodities, or tax law violations or fraud on the government and would like to consult with us on a confidential basis about a potential whistleblower case, please contact Jonah H. Goldstein or James E. Barz.