IRS Whistleblower Program: Reporting Tax Fraud & Earning Rewards (2024)

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What potential whistleblowers need to know about reporting tax fraud to the IRS

The IRS Whistleblower Program

The Internal Revenue Service’s whistleblower office incentivizes people to report tax evasion and other tax law violations.

The IRS Whistleblower Program rewards whistleblowers by paying 15 to 30% of government recoveries that result from the whistleblower’s reporting to the IRS Whistleblower Program.

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IRS Whistleblower Topics Covered Here:

  • History of the Tax Whistleblower Program
  • Elements of an IRS Whistleblower Case
  • The IRS Whistleblower Program Process
  • The IRS Whistleblower Reward
  • Key Features of the IRS Whistleblower Program
  • Speak to a IRS Whistleblower Attorney

History of the Tax Whistleblower Program

IRS Whistleblower Program: Reporting Tax Fraud & Earning Rewards (1) The Tax Relief and Health Care Act of 2006 created an IRS Whistleblower Office dedicated to working exclusively with whistleblowers, and providing eligible whistleblowers with a share of government recoveries.

While the IRS had a whistleblower program prior to 2006, that program was largely ineffective and had no provision for a guaranteed reward.

The federal False Claims Act, meanwhile, does not permit claims to be asserted for tax liabilities. However, a few states, including New York, the District of Columbia , Illinois, and Maryland have laws providing rewards for state tax whistleblowers.

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Elements of an IRS Whistleblower Case

To be eligible for an award, whistleblowers must provide specific and credible evidence that a taxpayer is avoiding or underpaying a tax obligation to the federal government, whether fraudulently or otherwise, and that information must substantially contribute to the government’s recovery of at least $2 million, including interest and penalties.

Because whistleblower rewards are only available when the amounts recovered are substantial, most successful claims have involved large tax avoidance schemes, corporate tax fraud, and fraud by high net worth individuals.

Read examples of the types of IRS tax fraud that can give rise to claims under the IRS Whistleblower Program on our Tax Fraud and Violations page.

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The IRS Whistleblower Program Process

IRS Whistleblower Program: Reporting Tax Fraud & Earning Rewards (2)

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The IRS has established a whistleblower office dedicated exclusively to working with whistleblowers.

It has specific regulations and guidelines that whistleblowers must follow. IRS whistleblowers submit their information to the IRS Whistleblower Office on an IRS Form 211; they do not file a complaint in federal court.

Experienced whistleblower attorneys can help whistleblowers submit stronger claims, connecting the whistleblower’s evidence with the applicable law. Such a well-documented submission will have better chances of success – both in encouraging IRS officials to investigate the fraud and in obtaining the largest possible rewards.

After submission of the Form 211, the IRS will examine the whistleblower’s evidence and determine what action to take, including whether an audit or enforcement proceeding against the defendant should be commenced.

The IRS maintains that strict tax privacy laws prevent it from disclosing what actions it has taken on a whistleblower submission or the status of any investigation. Typically, a whistleblower may be interviewed only once by the IRS, and may receive no further information until the IRS has either decided not to pursue collection or reached an agreement for payment of taxes. The Whistleblower Office will say only if the case is still open or has been closed. If a case has been closed and is payable, the whistleblower will be informed of this fact and the amount.

Unlike the FCA, the IRS whistleblower does not have any right to participate as a party in any enforcement action brought by the IRS against the defendant. If the IRS chooses not to pursue an enforcement action, the IRS Whistleblower Program does not provide a means for the whistleblower to independently pursue such an action.

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The IRS Whistleblower Reward

The IRS Whistleblower Program guarantees to the whistleblower at least 15%, and up to 30%, of government tax collections that result from the whistleblower’s reporting to the IRS, to the extent those recoveries exceed $2 million.

No reward is paid to the whistleblower until the IRS actually collects the taxes, penalties and interest owed, and all the statutory periods for a taxpayer to file a claim for a refund has expired.

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Key Features of the IRS Whistleblower Program

  • Under the IRS whistleblower law, whistleblowers who provide information during a pre-existing government investigation can be rewarded as long as the information provided is original and useful.
  • While the information provided by IRS whistleblowers should be original and not publicly known, the program’s standards are relatively flexible, and individuals may still receive an award if their submission adds to the information in the public domain in important ways. However, reliance on public information may reduce an IRS whistleblower’s reward amount.
  • While IRS whistleblowers must disclose their identities to the IRS when making a submission, the submission may be delivered in secret. The IRS has a strong policy to protect the whistleblower’s identity. The agency has generally been cooperative in taking steps to ensure that the targeted taxpayer does not learn that there is a whistleblower, much less that person’s identity. However, if the IRS decides to pursue the case, the whistleblower’s identity may be disclosed and also may be disclosed before obtaining any reward following an investigation, proceeding, or settlement.
  • Tax underpayment must be reported within three years of the filing of the incorrect tax return, or six years if the tax return understates income by at least 25%. If the taxpayer intended to commit tax fraud, however, this time is extended indefinitely.
  • You do not need to be a U.S. citizen to receive an award under the IRS Whistleblower Program.
  • A whistleblower who disagrees with the amount of a whistleblower award can appeal to the Tax Court.
  • Whistleblowers are generally entitled to protection from retaliation by their employers based on their reporting of tax violations.

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Speak to a IRS Whistleblower Attorney

This description of the elements and procedures of the IRS Whistleblower Program is general in nature. The IRS Whistleblower Program and the law surrounding it is complex.

The top whistleblower attorneys of Constantine Cannon understand the complicated, constantly changing landscape of state and federal whistleblower laws.

If you would like more information or would like to speak to a member of Constantine Cannon’s whistleblower lawyer team, please Contact us for a Confidential Consultation.

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IRS Whistleblower Program: Reporting Tax Fraud & Earning Rewards (2024)

FAQs

IRS Whistleblower Program: Reporting Tax Fraud & Earning Rewards? ›

The IRS Whistleblower Office pays monetary awards to eligible individuals whose information is used by the IRS. The award percentage depends on several factors, but generally falls between 15 and 30 percent of the proceeds collected and attributable to the whistleblower's information.

What is the IRS whistleblower program? ›

The IRS Whistleblower Office, which was established by the Tax Relief and Health Care Act of 2006, will process tips received from individuals who spot tax problems in their workplace, while conducting day-to-day personal business or anywhere else they may be encountered.

What is the whistleblower award for taxes? ›

The IRS Whistleblower Reward

The IRS Whistleblower Program guarantees to the whistleblower at least 15%, and up to 30%, of government tax collections that result from the whistleblower's reporting to the IRS, to the extent those recoveries exceed $2 million.

What is the federal whistleblower reward? ›

The Commission is authorized to provide monetary awards to eligible individuals who come forward with high-quality original information that leads to an SEC enforcement action in which over $1 million in sanctions is ordered. The range for awards is between 10% and 30% of the money collected.

What is the FTC whistleblower reward program? ›

How to Apply for an Award. Whistleblowers who voluntarily submit original information by filing a Form TCR (Tip, Complaint, or Referral) to the CFTC Whistleblower Office may be eligible to receive between 10% and 30% of the amount of monetary sanctions collected in a CFTC enforcement action or a Related Action.

Who qualifies as a whistleblower? ›

Who is a "Whistleblower"? A Whistleblower is any individual who provides the right information to the right people. Stated differently, lawful whistleblowing occurs when an individual provides information that they reasonably believe evidences wrongdoing to an authorized recipient.

How long does the IRS whistleblower process take? ›

Whistleblower awards can only be paid after a taxpayer has exhausted all appeal rights, paid the taxes and other amounts, and the taxpayer can no longer file a claim for refund or otherwise seek to recover proceeds from the government. That process may take up to 10 years or more to complete.

Who are eligible recipients whistleblower? ›

To access the legal rights and protections, a whistleblower must report their concerns to specific people within the company or organisation. These people are called 'eligible recipients'. Eligible recipients are company directors, company secretaries, other company officers, and senior managers.

How do you become a tax whistleblower? ›

Key Requirements
  1. A whistleblower must file IRS Form 211, an Application for Award for Original Information, directly to the IRS.
  2. The whistleblower's information must be specific and credible and able to be independently corroborated.
  3. The amount in dispute must exceed $2 million.

Do IRS whistleblowers stay anonymous? ›

Unlike the SEC Whistleblower Program, the IRS Whistleblower Program does not authorize whistleblowers to submit tips anonymously and remain eligible for a whistleblower award. However, the IRS does guarantee that it will keep the whistleblower's identity confidential when they file a tax fraud report.

Does the IRS pay reward whistleblowers? ›

More In Our Agency. The IRS Whistleblower Office pays monetary awards to eligible individuals whose information is used by the IRS. The award percentage depends on several factors, but generally falls between 15 and 30 percent of the proceeds collected and attributable to the whistleblower's information.

How much money does a whistleblower get? ›

Whistleblower awards can range from 10 to 30 percent of the money collected when the monetary sanctions exceed $1 million. As set forth in the Dodd-Frank Act, the SEC protects the confidentiality of whistleblowers and does not disclose information that could reveal a whistleblower's identity.

How much compensation can I get for whistleblowing? ›

A whistleblower of a False Claims Act is supposed to receive 15% to 25% of the case value or the amount paid by the defendant if the government intervenes. And 25% to 30% if the whistleblower goes on by him or herself. Some of the percentages are different under state laws.

What is the average settlement for a whistleblower? ›

Average California Whistleblower Settlement Amounts
Complexity of CaseSettlement Amount
MinorApproximately: $75,000 – $250,000
ModerateApproximately: $250,000 – $500,000
ComplexApproximately: $500,000 – $1,000,000+
Feb 14, 2024

How to file a federal whistleblower complaint? ›

You may submit a retaliation complaint to the Office of Special Counsel (OSC) via their website—or to the OIG by filing a complaint with the OIG Hotline, or calling us at (202) 326-2800. OSC is the entity tasked by Congress to investigate whistleblower retaliation against federal employees.

Are whistleblower awards tax free? ›

In the second case, in May 2010, a federal court in California in Alderson v. United States determined that a False Claims Act reward was taxable at ordinary income tax rates, not the lower capital gains rates.

What does a whistleblower program do? ›

The Whistleblower Program

The CFTC's Whistleblower Program provides monetary incentives to individuals who report possible violations of the Commodity Exchange Act that lead to a successful enforcement action, as well as privacy, confidentiality, and anti-retaliation protections for whistleblowers.

What is an IRS whistleblower form? ›

Whistleblowers must use IRS Form 211, Application for Award for Original Information, and ensure that it contains the following: ▪ A description of the alleged tax noncompliance, including a written narrative explaining the issue(s).

What happens when you report someone to the IRS? ›

The IRS Whistleblower Office pays monetary awards to eligible individuals whose information is used by the IRS. The award percentage depends on several factors, but generally falls between 15 and 30 percent of the proceeds collected and attributable to the whistleblower's information.

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