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GPSolo eReport

GPSolo eReport September 2024

How to Blow the Whistle on Tax Fraud and Get Paid by the IRS

Allison D. H. Soares and Lauren Suarez

Summary

  • Since 2007, the IRS Whistleblower Office has paid out more than $1.2 billion in awards to individuals who came forward as whistleblowers.
  • For a whistleblower claim to be seriously considered, it must contain specific, timely, and credible information. 
  • If you are considering submitting information to the IRS Whistleblower Office but are not sure how to proceed, consider talking with an experienced tax attorney or professional.
How to Blow the Whistle on Tax Fraud and Get Paid by the IRS
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Fraud happens every day in our own backyard. Various federal agencies have created whistleblower programs to alert them of ongoing fraud on things such as government loans, Medicare fraud, tax fraud, and money laundering. Even the Internal Revenue Service (IRS) has its own whistleblower program where taxpayers can alert the agency of fraud that they have experienced or seen from another taxpayer. Think of the IRS Whistleblower Office as individuals choosing to be the tax Batman for the IRS. When a taxpayer files a whistleblower action and the action comes to fruition for the IRS, the IRS hands over a monetary award to the original whistleblower if certain prerequisites are met. Since the program handed out its first monetary award in 2007, the Whistleblower Office has paid out more than $1.2 billion in awards to individuals who have blown the whistle on individual and business taxpayers as well as those promoting tax fraud schemes. Their actions resulted in the successful collection of $7 billion from taxpayers who were not in compliance.

A Short History of Whistleblowing and Tax Fraud

In true American fashion, we even have a National Whistleblower Appreciation Day on July 30, which is the day the Continental Congress passed the nation’s first whistleblower law in 1778. However, the first law related to whistleblowers on tax violations was not enacted until almost 90 years later, in March 1867. Tax fraud is one of the oldest professions in the world and still goes strong to this day. Break out your American flags and hundred-dollar bills and wave them proudly every July 30! God bless the U.S. Treasury.

Whistleblower information that the IRS can act on is an important component of effective tax administration and contributes to identifying noncompliance and reducing the tax gap (the difference between taxes legally owed and taxes collected). In fiscal year 2023, the IRS paid awards totaling $88.8 million based on whistleblower information attributable to tax and other amounts collected of $338 million. In fiscal year 2023, the Whistleblower Office established 16,932 award claims, an increase of 44 percent compared to the average of the prior four years.

How to Submit a Whistleblower Claim

For a whistleblower claim to be seriously considered, it must contain specific, timely, and credible information. A whistleblower usually qualifies for an award when the IRS uses the information and is able to collect proceeds because of it. Generally, the awards paid to whistleblowers range between 15 percent and 30 percent of the proceeds collected and attributable to their information.

To submit a whistleblower claim, an individual must use IRS Form 211, Application for Award for Original Information. The whistleblower must also include a description of the alleged tax noncompliance, including a written narrative explaining the issue, along with information to support the narrative, such as copies of books and records, ledger sheets, receipts, bank records, contracts, emails, and the location of assets. The claim must also contain a description and the location of documents or supporting evidence not in the whistleblower’s possession or control, as well as an explanation of how and when the whistleblower became aware of the information that forms the basis of the claim.

The whistleblower must also present a description of their current or former relationship (if any) to the subject of the claim (e.g., family member, acquaintance, client, employee, accountant, lawyer, bookkeeper, customer). And finally, the whistleblower must include their original signature and the date of signature. That information should be mailed to the IRS Whistleblower Office (Internal Revenue Service, Whistleblower Office – ICE, 1973 N. Rulon White Blvd., M/S 4110, Ogden, UT 84404). The Whistleblower Office is currently working on a digital submission portal for whistleblower claims, which it plans to have online in 2025.

A Nice Perk, Not a Full-Time Gig

As tax professionals who have been practicing in the tax controversy space for many years, we regularly see individuals who try to make IRS whistleblowing into their profession. They are constantly looking for businesses or other individuals who may be committing tax fraud either through their own filings or their promotion of fraudulent tax schemes. We equate these individuals to those who play the Mega Millions, hoping to hit the jackpot.

Don’t Be Afraid to Ask for Help

If you are considering submitting information to the IRS Whistleblower Office but are not sure how to proceed, consider talking with an experienced tax attorney or professional who can listen to your facts and circumstances. The tax attorney or professional can help you complete Form 211 or advise you whether it may or may not be considered valuable information to the Whistleblower Office.

Now, go out there and catch some bad guys!

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