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The IRS Whistleblower Office pays money to people who blow the whistle on persons who fail to pay the tax that they owe. If the IRS uses information provided by the whistleblower, it can award the whistleblower up to 30 percent of the additional tax, penalty and other amounts it collects.
The IRS may pay awards to people who provide specific and credible information to the IRS if the information results in the collection of taxes, penalties, interest or other amounts from the noncompliant taxpayer.
The IRS is looking for solid information, not an “educated guess” or unsupported speculation. We are also looking for a significant Federal tax issue – this is not a program for resolving personal problems or disputes about a business relationship.
The law provides for two types of awards.
If you decide to submit information and seek an award for doing so, use IRS Form 211. The same form is used for both award programs.
Process for Evaluating Whistleblower’s Claim
A threshold requirement for any award under 7623 is that the information must lead to judicial or administrative action – an audit or investigation resulting in the collection of proceeds.
An analyst in the Whistleblower Office will consider the information provided by the whistleblower. The IRS has to decide that the case is worth pursuing.
In the case of a large corporate taxpayer whose returns are audited each year, an administrative action can mean the creation of a new issue under the Audit Plan or a change in the way information about an issue is collected or analyzed, which would not otherwise have occurred without the information provided by the whistleblower.
In other cases, an administrative action can mean placing a taxpayer under audit who was not already under audit.
The process, from submission of complete information to the Service until the proceeds are collected, may take several years.
Payments of awards will not be made until after the taxes, penalties, interest, additions to tax and additional amounts that are finally determined to be owed to the Service have been collected.
Examples of when a final determination of tax liability can be made include, but are not limited to
at the administrative level when the Service and the taxpayer enter into a closing agreement wherein the taxpayer conclusively waives the right to appeal or otherwise challenge a deficiency or additional tax liability determined by the Service;
if a taxpayer petitions United States Tax Court; when a decision becomes final within the meaning of section 7481; and
After the expiration of the statutory period for a taxpayer to file a claim for refund and to file a refund suit based on the claim against the Untied States, or
if a refund suit is filed, when the judgment in that suit becomes final.
A finding of fraud in a tax case carries some significant additional implications for penalties, fines and jail time. In the context of whistleblower claims, it also has statute of limitations implications that can make a big difference for the whistleblower.
The discretionary maximum percentage of award for an (a) case is 15 percent, up to $10 million.
If the whistleblower planned and initiated the actions that led to the underpayment of tax, or the violation of the internal revenue laws, the award may be reduced.
The Whistleblower Office will make the final determination whether an award will be paid and the amount of the award.
Award will be paid in proportion to the value of the information furnished voluntarily with respect to proceeds collected, including penalties, interest, additions to tax and additional amounts.
The amount of the award will be at least 15 percent but not more than 30 percent of collected proceeds in cases in which the Service determines that the information submitted substantially contributed to the Service’s detection and recovery of tax.
If an action is based principally on allegations resulting from judicial or administrative proceeding, government reports, hearing, audit, or investigation, or the news media, an award of lesser amount, subject to the discretion of the Whistleblower Office, may be provided. The award will not be more than 10 percent of collected proceeds as described above. This reduction in award percentage does not apply if the whistleblower was the initial source of the information.
If the whistleblower planned and initiated the actions that led to the underpayment of tax, or the violation of the internal revenue laws, the Director, Whistleblower Office may reduce the award.
If the whistleblower is convicted based on his/her role in planning and initiating the action, then the Whistleblower Office is required to deny the award.
Prior to issuing an award check, the IRS will verify the informant’s mailing address.
All awards will be subject to current federal tax reporting and withholding requirements.
Whistleblower will receive a Form 1099 or other form as may be prescribed by law, regulation, or publication.
The Whistleblower Office will communicate the final claim determination, in writing to the claimant. Final determinations regarding awards under 7623(b) may, within 30 days of such determination, be appealed to the United States Tax Court.
Decisions under section 7623(a) may not be appealed to the Tax Court.
Submission of Information for Award under 7623 (a) or (b)
All whistleblower claims must be submitted under penalty of perjury.
Individuals must submit information on Form 211, application for Award for Original Information.
Internal Revenue Service
1111 Constitution Ave., NW
Washington, D.C. 20224
Confidentiality and Disclosure for Whistleblowers
The rules governing confidentiality of informant information
The law applies to claims filed after enactment date December 20, 2006.
The award percentage ranges are statutory, with a general range between 15% to 30%, with some exceptions. There is no limit on the dollar amount of the award.
A reduced award amount of up to 10% in cases based principally on disclosure of specific allegations resulting from:
An appropriate reduction if the whistleblower “planned and initiated” the non-compliance.
The law applies to cases in which the amount in dispute exceeds $2 million. If the taxpayer is an individual, the individual’s gross income must exceed $200,000 for any taxable year at issue in a claim.
Requires the Whistleblower Office to analyze these $2 million cases, and authorizes the IRS to request assistance from the whistleblower and their counsel.
Individuals are eligible for awards based on additions to tax, penalties, interest, and other amounts collected as a result of any administrative or judicial action resulting from the information provided.
If the thresholds in 7623(b) are not met, section 7623(a) authorizes, but does not require, the Service to pay for information relating to violations of the internal revenue law that result in recovery of tax.
The requirements of the new rules enacted in IRC Section 7623(b), the Whistleblower Program
The Service will protect the identity of the whistleblower to the fullest extent permitted by the law.
Under some circumstance, such as when the whistleblower is an essential witness in a judicial proceeding, it may not be possible to pursue the investigation or examination without revealing the whistleblower’s identify.
The Service will inform the whistleblower before deciding whether to proceed in such cases.
Once a claim is submitted, the informant may be told only the status and disposition of the claim – not the action taken in the taxpayer case.
We can say whether the claim is still open or has been closed.
If closed we can say that a claim is payable (and the amount) or that the claim is denied.
The requirement of the rules governing claims that do not meet the requirements of the provisions in the whistleblower program under IRC Section 7623(b). These claims are part of the Informant Claims Program.