The IRS whistleblower program provides the public with a unique opportunity to get money from the IRS, instead of paying money to the IRS as is usually the case. Under the whistleblower program, the IRS pays money to people who “blow the whistle” on individuals or businesses who provide information to the government regarding tax underpayments or other violations of internal revenue laws. This includes providing information about unfiled tax returns, underreported income, undisclosed bank accounts and undervalued taxable estates or gifts.
If the IRS uses information provided by the whistleblower to successfully collect taxes, interest and penalties from a person or business who is in violation of tax laws, the IRS will award the whistleblower up to 30% of the additional amounts collected by the IRS.
Filing a Successful Whistleblower Claim
In order to receive a whistleblower award from the IRS, the whistleblower must provide a highly detailed description of what they know about the case. In particular, a whistleblower claim should contain:
- A very detailed, specific written narrative of the tax noncompliance issue
- Information based on first-hand knowledge to support the story, such as the location of assets and financial records.
- Description of documents that the whistleblower has that support the story
- Explanation of how the whistleblower learned about the story
- Description of relationship between the whistleblower and the subject of the claim.
Whistleblower claims will be rejected if they are speculative or not credible.
The IRS may decide not to pursue a whistleblower claim due to quality of claim information or if the statute of limitations is too short for enforcement action. Claims will also be denied if the information provided does not result in the collection of any proceeds by the IRS.
In 2019, nearly 51% of whistleblower claims were rejected due to allegations that were not specific or credible.
Extreme Patience is Required
The IRS will tell the whistleblower if their claim is under consideration. However, the IRS will provide very few updates to the whistleblower other than this.
The whistleblower process requires extreme patience. On average, the IRS takes 7-10 years to process a whistleblower claim.
Whistleblower Claim Awards
Claim awards under the whistleblower program are up to 30% of the amount collected by the IRS as a result of information submitted by the whistleblower. In some cases, whistleblower claims into the millions of dollars have been awarded.
Any person can be a whistleblower and be eligible for a whistleblower award. However, whistleblowers who were involved in the tax crime of the taxpayer subject to the whistleblower claim do not have immunity from prosecution. Therefore, if a person does not have “clean hands,” they should carefully consider if it makes sense to bring a whistleblower claim that may result in their own criminal prosecution.
June 2022 Update
The IRS Whistleblower Office published a report in June, 2022 stating that in the fiscal year ended September 30, 2021, the Whistleblower Office made 179 award payments to whistleblowers totaling $36 million. During this same period, proceeds collected by the Whistleblower Office were $245 million, including $22 million collected for criminal fines, civil forfeitures and violations of reporting requirements.
According to the report, “Whistleblower claim numbers assigned in FY 2021 grew by 55% year over year, the second highest level of new claim numbers in the history of the program and claim closures also increased by 13%.”
The report also notes that during fiscal year 2021, the Whistleblower Office underwent a major reorganization to better serve whistleblowers and accommodate the growth of the program.
We hope that the IRS and Congress will continue to support this important program.
If you or someone you know has an issue with the IRS (including potential whistleblower cases), please contact us at (678) 235-5460, or by email at Gary.Massey@masseyandcompanyCPA.com. Our services include tax return preparation, tax planning, tax debts, unfiled returns, audits, offers in compromise, installment agreements, and innocent spouse relief. We make the tax nightmare go away.
Massey and Company CPA is a boutique accounting firm located in Atlanta and Chicago providing tax and accounting services to small businesses and individuals in Georgia, Illinois and in states throughout the country.
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