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What Is The IRS Whistleblower Statute?

  • By: Robichaux Law Firm, LLC

A whistleblower is anyone who reports the immoral, fraudulent, or otherwise harmful activity of an individual or organization. There are many provisions and laws set up on both a federal and state level to protect and encourage whistleblowers.

One of the most central whistleblower protection laws is the False Claims Act, which was also the first law of its kind. The FCA protects anyone who “blows the whistle” on actions that financially damage the US government, usually through fraud. It does this in part through a provision allowing for qui tam suits, or suits filed by individuals or NGOs on behalf of the US government. In addition to protecting these whistleblowers, the FCA mandates that if their information led to a successful prosecution, they will be given a portion of 15%-30% of the proceeds of the suit. Considering that this includes all civil suits in addition to criminal suits, and these cases often carry treble damages, this percentage could represent a sizable sum of money.

The IRS has a version of the False Claims Act, usually referred to as the IRS Whistleblower Program.

What Is The IRS Whistleblower Program?

The IRS Whistleblower Program was instituted to help cut down on wealthy people and businesses skirting their tax obligations. Often, the very wealthiest people and companies will try to cut costs by reducing their tax liability. While there are legal ways to do this, illegal tax evasion is also commonly employed. The IRS Whistleblower Program allows individuals to report significant tax underpayments or evasions. This includes, but is not limited to:

  • Underreporting income
  • Overstating deductions
  • False recordkeeping
  • Misuse or abuse of trusts
  • Stock-related fraud
  • Hiding assets
  • Shifting assets offshore for evasion purposes
Is There An Award For Reporting To The IRS Whistleblower Program?

Yes. If the information you give to the IRS results in successful prosecution and/or financial recovery, you are entitled to an award of at least 15% and up to 30% of the recovery. The actual percentage you may receive beyond the requisite 15% is at the discretion of the IRS. Generally, though, the bigger your contribution, the more they are likely to give you.

However, in order to receive this award, you must qualify for the program.

What Are The Qualification Requirements For The IRS Whistleblower Program Award?

In order to qualify for this program and the right to your award, the case must meet certain conditions.

  • Debt amount: To be automatically accepted into the program, the debt you are informing about must be over $2 million, including interest and penalties. The IRS may accept cases with lower debts at their own discretion, but are not required to do so automatically. It should be noted that these discretionary awards are capped at a maximum of 15% of the proceeds or $10 million (whichever is reached first).
  • Income Level: If you are reporting on an individual, they must have earned at least $200,000 in at least one of the years during which they paid less than they owed in taxes.
  • Level of Participation: If you participated in tax fraud yourself, you may report on that fraud so long as you did not plan or initiate the fraud, and are not convicted in a criminal proceeding related to it.
  • Previously Unreported: The case you are informing about must not have been previously reported.
  • Original Information: The information that you give to the IRS must not come from judicial or administrative proceedings; government reports, hearings, audits, or investigations; or the news media. The IRS may accept information that came from those sources at their discretion, and may also award for it at their discretion.
  • Time Limit: In cases where someone under-reported income and it’s unclear if they intended to commit tax evasion, you must report the fraud within three years of the filing of the fraudulent tax return. This time limit is extended to six years if the tax return understates income by at least 25%. In cases where the filer can be proven to have filed a false tax return with the intent to commit tax evasion, there is no time limit.
How Do I Report Fraud Through The IRS Whistleblower Program?

Your best course of action is to consult with or hire a whistleblower attorney as soon as you think you have a viable case. This attorney will protect your interests and safety, ensure that your case is filed according to all rules and standards, help you make a sound, convincing argument, and argue for your reward.

Once you have contacted an attorney, you will gather evidence and build your case. An attorney can help you craft a narrative backed up by as much evidence as possible about what happened. The more documentation you can provide, the likelier the IRS is to actually pursue and prosecute the case.

Once you have built your case up sufficiently, you and your attorney submit the relevant information to the IRS Whistleblower Office using a specific form (IRS Form 211). If the IRS is interested, the case will then proceed from there.

What Should I Keep In Mind About Whistleblowing To The IRS?

While it is generally considered a worthwhile and good thing to do to rectify tax fraud, you should realistically understand that there are risks involved. While the IRS will protect your identity, there are some circumstances in which it may be revealed (including if there is ever a criminal proceeding that results from your report.) In addition, though you do have some legal protections against retribution, you may become the subject of various types of attack from the person you reported on. An experienced whistleblower attorney can fully explain the potential risks involved in your case, and advise you about whether or not you should proceed.

Do you think you have that might qualify for the IRS Whistleblower Program? Call (504) 332-8188 for a free consultation today.

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