Filing A Tax Fraud Claim
The IRS may pay whistleblowers 15 to 30 percent of the government’s recovery. The reward is paid only upon completion of an investigation into the tax fraud or underpayments and collection of the taxes. In order to recover, whistleblowers need to be the original source of information provided to the IRS.
Basics Of Filing A Claim
The Internal Revenue Manual states the following:
1. Under section 7623(b)(1), awards will be paid in proportion to the value of information furnished voluntarily with respect to proceeds collected, including penalties, interest, additions to tax and additional amounts. The amount of any award will be at least 15%, but no more than 30%, of the collected proceeds in cases in which the Service determines that the information submitted by the whistleblower substantially contributed to the service’s detection and recovery of tax. An award under this section may not be paid unless the IRS takes an administrative or judicial action based on the information provided by the individual.
2. Under section 7623(b) (2), if an action is based principally on specific allegations resulting from judicial or administrative hearings, government reports, hearings, audits, investigations or from the news media, an award of a lesser amount, subject to the discretion of the Whistleblower Office, may be provided; such an award, however, may not exceed 10% of the collected proceeds, including penalties, interest, additions to tax and additional amounts resulting from the action. Section 7623(b) does not apply if the whistleblower was the original source for the information that led to the specific allegations.
3. Under section 7623(b) (3), if the whistleblower “planned and initiated” the actions that led to the underpayment of tax, or to the violation of the internal revenue laws, the Whistleblower Office may reduce the award. If the whistleblower is convicted of criminal conduct arising from his or her role in planning and initiating the action, the Whistleblower Office shall deny any award.
Section 7623(b) applies with respect to any action in which the amount in dispute (taxes, penalties, interest, additions to tax and additional amounts) 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 the action. An action is based on the information provided by the whistleblower if the IRS would not have acted but for the receipt of the information from the whistleblower. Action by the IRS may include the initiation of an examination or investigation that would not otherwise have been undertaken, or the modification of a pending or planned examination or investigation as a result of information provided by the whistleblower.