June 29, 2018
Rewards for Tax Fraud Whistleblowers
Editor’s note: Thanks to the False Claims Act, IRS-related fraud is being reported and exposed more than ever due to the brave efforts of whistleblowers – who then get rewarded for their actions. This older blog post is from our Qui Tam archives and is worth viewing and reading again.
Tough economic times may lead to more tax fraud schemes. That is good news for tax fraud whistleblowers seeking to reap substantial rewards from a law enacted by Congress in 2006. This law requires the IRS Whistleblower Office to pay rewards to individuals who blow the whistle on persons who fail to pay the taxes that they owe the Government. The rewards range from 15% to 30% of the taxes, penalties, and interests collected by the IRS in the case. However, certain conditions must be met first. For example, the whistleblower only receives this monetary reward if more than $2 million is at issue in the case and the IRS actually uses the information provided by the whistleblower.
The process begins with the whistleblower filling out a Form 211, Application for Award for Original Information, describing the tax fraud that he or she knows about and attaching documents to support the allegations. All whistleblower claims must be submitted under penalty of perjury; therefore, individuals often seek the assistance of an attorney.
Concerns about retaliation for snitching are alleviated by the provisions of this law because the whistleblowers identity, and even his or her existence, remains a secret and kept out of the public forever. This is quite different than in a qui tam case where the whistleblowers identity is eventually revealed.
Once the form is submitted, the IRS evaluates the case and decides whether it is worth pursuing. The IRS keeps a tax fraud whistleblower in the dark about the progress of the case until it is closed, which could take years. Even after waiting for the IRS to successfully prosecute the individual who committed the tax fraud, whistleblowers should not expect to see their reward immediately because the IRS does not pay out the reward until the accused has exhausted his appeals and paid the owed taxes.
Since the passage of the 1986 amendments to the FCA, settlements and judgments have totaled in excess of $15.6 billion, including both qui tam and non-qui tam settlements and judgments for whistleblowers. You can learn more about financial rewards for whistleblowing activities by visiting this page on our website regarding financial statistics.