Confidential informants and whistleblowing: Making Money by helping the IRS!
What is the IRS Whistleblower Program?
Believe it or not, the IRS has a program set up to reward taxpayers who to inform the IRS about other taxpayer’s tax fraud or tax evasion. That’s right! Called the IRS Whistleblower Office, this office accepts tips from individuals who believe they may have spotted tax problems at their place of employment or have information on others who have not filed or paid their taxes.
You may be awarded up to 30% of the tax penalty or other collected money, if the IRS uses the information provided by you. So how does the program work?
What happens to a claim for an informant award?
Although this may sound like an easy way to make extra cash, there are a few things to consider if you’re thinking about becoming an IRS whistleblower.
- The IRS only awards people for specific information that is both creditable and useable.
- The information must result in the IRS collecting taxes, penalties, or other amounts from the noncompliant party.
- Tips you provide cannot be submitted anonymously. However, your identity is kept confidential.
- All claims have to be submitted under penalty of perjury.
There are other rules according to irs.gov, such as:
- The award percentage ranges between 15% to 30%, with some exceptions. There is no limit on the dollar amount of the award.
- A reduced award amount of up to 10% in cases based principally on disclosure of specific allegations resulting from:
- Judicial or administrative hearings,
- From a governmental report, hearing, audit, or investigation,
- Or from the news media.
- An appropriate reduction if the whistleblower “planned and initiated” the non-compliance.
- These rules apply to cases in which the amount in dispute exceeds $2 million. If the taxpayer is an individual, the noncompliant individual’s gross income must exceed $200,000 for any taxable year at issue in a claim.
- If the above $2 million/$200,000 threshold is not met, then the law authorizes, but does not require, the Service to pay for information relating to violations of the Internal Revenue Code which result in recovery of tax.
- You may appeal an IRS decision regarding a covered award to the U.S. Tax Court.
- Other rules can be found at: https://www.irs.gov/compliance/internal-revenue-code-irc-7623b
How do you file a whistleblower claim?
The process for filing a whistleblower claim is fairly straightforward. You need to complete a Form 211 and submit it to the Whistleblower office. A link to the form and instructions here: How Do You File a Whistleblower Award Claim Under Section 7623 (a) or (b) | Internal Revenue Service (irs.gov)
While you may disagree about how your tax dollars are spent, we are all aware that paying taxes is a lawful act in the United States. Unfortunately, the IRS cannot be everywhere and know everything. The IRS Whistleblower program is there to reward people who help bring those who break the law to justice.
I am Maine’s IRS Problem Solver. My firm helps Maine taxpayers in trouble. If you or someone you know in Southern Maine wants more information on how to resolve your IRS tax problems, please feel free to contact me directly at 207-502-7181 or by filing out my contact form. A Maine tax attorney can help you consider your options.
James D. Wade, Esq.
Law Office of James D. Wade
57 Portland Road, Unit 3
Kennebunk, ME 04043