Reporting Someone to the IRS: A Whistleblowers Guide (2024)

Reporting someone to the IRS means you want to be a whistleblower. There are three general steps to successfully and anonymously reporting tax fraud, this includes (1) hiring an attorney (2) gathering evidence, and (3) submitting a formal claim (IRS Form 211).

Remember, the IRS is only interested in taking tax fraud cases where the fraud being committed exceeds $2 million (over a single or several tax years), and for tax non-compliance for individuals, their annual gross income must exceed $200,000. Whistleblowers who file claims below these thresholds are not eligible for rewards, but may file claims using the IRS Information Referral form.

How to report income tax evasion and fraud:

Claims for awards that provide specific and credible information regarding tax underpayments or violations of internal revenue laws and that lead to proceeds collected may qualify for an award. According to the IRS, it is “looking for solid information, not an ‘educated guess’ or unsupported speculation.” If a whistleblower’s allegations cannot be “independently corroborated,” a claim will be denied.

Types of evidence the IRS is looking for include copies of books and records, ledger sheets, receipts, bank records, contracts, emails, and the location of assets.

A whistleblower must not violate the law in order to obtain information about tax fraud. The IRS states that “under no circ*mstances do we support or condone illegal actions to secure documents.” In instances where a whistleblower is aware of supporting evidence but cannot legally obtain the information, the whistleblower should carefully describe to the IRS what the documents are and where they can be found.

The next step to report someone to the IRS is to file IRS Form 211, which is an Application for Award for Original Information. This document must contain the following:

• A description of the alleged tax noncompliance, including a written narrative explaining the issue(s).
  
• Information to support the narrative, such as copies of books and records, ledger sheets, receipts, bank records, contracts, emails, and the location of assets.
  
• A description of documents or supporting evidence not in the whistleblower’s possession or control, and their location.
  
• An explanation of how and when the whistleblower became aware of the information that forms the basis of the claim.
  
• A complete description of the whistleblower’s present or former relationship (if any) to the subject of the claim (for example, family member, acquaintance, client, employee, accountant, lawyer, bookkeeper, customer).
  
• The whistleblower’s original signature on the declaration under penalty of perjury (a representative cannot sign Form 211 for the whistleblower) and the date of signature.

Again, we highly suggest hiring an attorney to help you prepare these documents. Failure to provide sufficient information may result in your claim being dismissed. All communications are confidential and protected under strict attorney-client privilege.

If you choose to submit Form 211 and supporting documents without the assistance of attorney, you will send information to the following address:

Internal Revenue Service
Whistleblower Office – ICE
1973 N Rulon White Blvd.
M/S 4110
Ogden, UT 84404
View on Google Maps

Once you’ve submitted your claim, an analyst from the IRS will process it and decide whether to reject the claim, or file it under 7623 (a) or (b) as per the Internal Revenue Code (IRC). If a claimant’s submission does not meet the criteria for IRC section 7623 (b) consideration, the IRS will consider it for the discretionary program under IRC section 7623 (a) of the Code.

The Whistleblower Office will communicate the final claim determination, in writing to the claimant. Determinations regarding awards under 7623 (b) may, within 30 days of such determination, be appealed to the US Tax Court. However, decisions under section 7623 (a) may not be appealed to the Tax Court.

The process of reporting someone to the IRS, from submission of complete information to the IRS until the proceeds are collected, may take several years. The IRS does not pay a whistleblower award until after the taxpayer exercises the right to administrative and judicial appeals, which can take many years to resolve. Note that a finding of criminal activity or fraud in a case may result in additional implications for a fraudster – this may include harsh penalties, fines or possibly even jail time.

Staffing and budgetary shortages at the IRS Whistleblower Program have led to troubling delays in the issuance of whistleblower awards. According to the IRS Whistleblower Program’s Annual Report to Congress from Fiscal Year 2020, the program currently takes 10.79 years to process a claim. However, Kohn, Kohn & Colapinto and other whistleblower advocates are actively pushing for legislative reforms to shorten these delays.

Below are a few cases that give you an idea of the time it may take:

• Bradely Birkenfeld first made a whistleblower disclosure to the IRS in May 2007 about illegal banking practices by UBS bank in Switzerland. Birkenfeld’s disclosure and cooperation with U.S. authorities led directly to the February 2009 settlement in which UBS agreed to pay $780 million in fines, penalties, interest and restitution. Birkenfeld received his record $104 million whistleblower award in September 2012, over five years after his initial disclosure.
• An anonymous husband and wife whistleblower team, identified only as Whistleblower 21276-13W and Whistleblower 21277-13W, first met with U.S. government agents (including IRS agents) in 2010 and began cooperating with authorities. At the time, the whistleblowers were not aware of the IRS whistleblower program. In April 2013, the whistleblowers filed a Form 211 with the IRS Whistleblower Program. In August 2013, the IRS denied the whistleblowers’ award claims but the whistleblowers filed an appeal in September 2013. Finally, in August 2016 the U.S. Tax Court issued a precedent-setting ruling awarding the whistleblowers $17,791,607.

Not all cases are treated the same by the IRS. The duration of the process depends on the severity of the case and many other complex factors. Not to mention, the amount paid to whistleblowers is quite substantial, so they must diligently investigate each eligible claim.

Since the inception of the IRS Whistleblower Reward Program, the IRS has awarded whistleblowers over a whopping $1 billion for their information. This number grows every year as more and more whistleblowers come forward with information.

There are many more forms of tax evasion, fraud, and non-compliance. The IRS whistleblower program covers criminal and non-criminal tax fraud and evasion, but also the non-deliberate underpayment of taxes.

Commonly reported tax compliance issues include:

• Offshore tax havens – moving money overseas to avoid reporting taxable income
• Money laundering – hiding the source of illegal money, while at the same time, mixing it with money generated by a legitimate business.
• Shell accounts – setting up multiple businesses and bank accounts, and circulating money amongst all of them for added tax benefit
• Fraudulent accounting – submitting fraudulent balance sheets, hiding assets offshore, or “cooking the books”
• Employee Misclassification– categorizing employees as contractors to avoid paying taxes
• Disaster Relief Fund Fraud – setting up multiple businesses and applying for relief under each company
• False reporting – underreporting of revenue or income, or incorrect information on tax returns
• Bogus Classification – blatantly filing taxes under certain tax-exempt status, yet not qualifying
• Deductions – claiming deductions, yet not qualifying

Some tax-avoidance schemes are much more sophisticated than others, such as the schemes that take place by organized crime, hedge funds, and across the blockchain.

The IRS also has their eyes set on virtual currencies and transactions, which they treat as property. Tax fraudsters have been able to avoid paying billions in taxes by moving taxable assets into the new crypto economy.

You should absolutely report someone to the IRS if you suspect they are cheating the system or underpaying taxes through fraudulent means.

A 2018 survey conducted by the IRS showed that 95% of Americans believe everyone should properly pay their taxes, with 85% saying it’s unacceptable to cheat on taxes, and 90% saying tax cheats should be held accountable.

Tax fraud is a huge contributing factor to the United State’s enormous tax gap, the difference between taxes owed to the IRS and taxes paid. In 2021, IRS commissioner Chuck Rettig told the Senate Finance Committee that the nation’s tax gap is approximately $1 trillion. This tax gap is a huge source of inequity.

A vast majority of the unpaid taxes in the tax gap are those of the nation’s wealthiest individuals and large corporations. Armed with the tools to commit tax fraud, the wealthy are able to avoid paying taxes on their assets, further deepening income inequality. Furthermore, the loss of revenue hurts funding for government funding and projects.

“The IRS Whistleblower Program plays an important role in reducing the Tax Gap by providing an avenue for reporting tax evasion,” wrote IRS Commissioner Chuck Rettig.

“Tax whistleblowers provide valuable leads and often offer unique insights into compliance challenged taxpayers. In these situations, the Whistleblower Office is charged with processing 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.”

IRS whistleblowers have already proven to be able instigate systemic change. Bradley Birkenfeld’s whistleblower disclosures about UBS bank led to the bank paying a fine of $780 million, closing all known U.S. accounts, and turning over the names of 4450 U.S. taxpayers for prosecution in the United States.

In a major law review article, the Chairman of the IRS Advisory Council explained how Birkenfeld’s whistleblowing ended illegal Swiss banking for most Americans, led to the closure of tens of thousands of offshore accounts, and the collection of tens of billions of dollars from tax law violators.

If you’d like assistance reporting criminal or non-criminal tax fraud or evasion, please get in touch with our whistleblower attorneys today.

• June 26, 2024

  IRS Whistleblower Program’s Annual Report Shows that Whistleblowers are Doing Their Job, but that Congress Must do Theirs

• June 6, 2024

  Whistleblower Tax Fraud Lawsuit Against Bitcoin Billionaire Settles for $40 Million

• May 8, 2024

  IRS 2024 Dirty Dozen Highlights Major Tax Scams, Including Abusive Tax Schemes

Frequently Asked Questions