Journal of Tax Practice & Procedure, April-May 2012, page 21
9 Pages Posted: 12 Jun 2012
Date Written: May 1, 2012
The IRS Whistleblower Office processes financial awards to people who provide information about the tax indiscretions of others. It can be lucrative for the informant and greatly enhance the ability of the IRS to pinpoint tax noncompliance without having to unnecessarily utilize limited tax enforcement resources. 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. If the IRS uses information provided by the whistleblower, based on recently finalized Treasury Regulations the whistleblower can receive up to 30 percent of the additional tax, penalty and other amounts collected or refund denied!
There are currently two basis types of whistleblower awards. Pursuant to Code §7623(b), if the taxes, penalties, interest and other amounts in dispute exceed $2 million, and a few other qualifications are met, the IRS will pay 15 percent to 30 percent of the amount collected. If the noncompliant taxpayer is an individual, their annual gross income must exceed $200,000. There is no limit on the dollar amount of the award. A reduced award amount of up to 10% is available in cases based principally on disclosure of specific allegations resulting from: (i) judicial or administrative hearings, (ii) from a governmental report, hearing, audit or investigation, or (iii) from the news media. The award is reduced if the whistleblower “planned and initiated” the non-compliance and the award is to be denied if the whistleblower is convicted of criminal conduct arising from their role in planning and initiating the non-compliance. Awards are subject to appeal to the U.S. Tax Court.
If the thresholds in Code §7623(b) are not satisfied, Code §7623(a) authorizes, but does not require, the IRS to pay for information relating to violations of the internal revenue law that result in recovery of tax. The maximum award is 15 percent of up to $10 million. In addition, these awards are discretionary and the whistleblower cannot dispute the outcome of the claim in Tax Court.
Keywords: IRS, whistleblower, whistle blower, reward, award, tax, penalty, tax claim, informant, Code § 7623
Suggested Citation: Suggested Citation
Rettig, Charles P., The IRS Whistleblower Program: Making Money the Old Fashioned Way! (May 1, 2012). Journal of Tax Practice & Procedure, April-May 2012, page 21. Available at SSRN: https://ssrn.com/abstract=2081999