Matthew Stock, an attorney, Certified Public Accountant (CPA) and Certified Fraud Examiner (CFE), is routinely quoted in the media about whistleblower rewards programs. Recently, BNA interviewed Stock about IRS whistleblower rewards.
The IRS estimates that the United States loses more than $688 billion per year to tax evasion. To combat tax fraud, Congress enacted legislation providing robust incentives for whistleblowers to report tax fraud. Under 26 USC § 7623(b), the IRS is required to issue an award to tax whistleblowers of 15% to 30% of proceeds collected from tax fraud or tax underpayments if:
In enacting the IRS whistleblower bounty legislation, Congress provided mandatory awards to tax whistleblowers for high-quality tips. Section 7623(b) suggests a focus on large-scale tax fraud in that Congress removed the previous cap of $10 million on IRS whistleblower awards. Thus, if a whistleblower meets the requirements above, the whistleblower may be able to receive a substantial payout.
On July 2, 2019, the Taxpayer First Act was signed into law. The law provides tax whistleblowers, among other things, significant protections against retaliation. Read more about the tax whistleblower protection law here.
A denial of an award or reduction of up to 10% may be made in cases where the information provided to the IRS is:
Tax whistleblower awards are subject to appeal to the U.S. Tax Court within 30 days of an IRS determination. For additional information on the process, click here.
If a tax whistleblower case does not meet the $2 million threshold (or cases involving individual taxpayers with gross income of less than $200,000), a whistleblower award may still pursue an award under section 7623(a). Under this section, the IRS may issue a discretionary award to a whistleblower for tips that lead to “detecting underpayments of tax, or bringing to trial and punishment persons guilty of violating the internal revenue laws or conniving at the same.” The awards under this program are a maximum of 15% of the proceeds collected, capped at $10 million. It should be stressed that awards under this program are discretionary, whereas awards under 7623(b) are mandatory.
Since the inception of the IRS Whistleblower Program, the IRS has issued more than $931 million in awards to whistleblowers. Since FY 2012, the IRS issued more than $841 million in awards:
Notable successes of the IRS Whistleblower Program include:
The IRS Whistleblower Office has recently released Publication 5251 – The Whistleblower Claim Process. The new publication provides general guidance on the tax whistleblower program and clarity on the types of information whistleblowers should provide to the office. In addition, the publication explores what happens to claims after the IRS receives them, communication with the IRS after a submission, and a process timeline for claims.
Under the new tax whistleblower statute, the IRS is required to issue a reward to tax whistleblowers of between 15% and 30% of collected proceeds from tax fraud or tax underpayments if:
In the publication, the IRS outlines the types of “specific and credible” information that whistleblowers should provide when submitting a tip. This includes:
It is important for tax whistleblowers to provide the best information available as it may support the increase of a reward percentage (among other factors).
Thereafter, if the IRS does not pursue the claim, the agency will send the whistleblower a claim denial letter. Alternatively, if the IRS decides to pursue the claim, whistleblowers are able to receive updates from the IRS concerning the progress of the investigation. Under the Taxpayer’s First Act, which was enacted on July 1, 2019:
The Secretary shall disclose to an individual providing information relating to any purpose described in paragraph (1) or (2) of section 7623(a) the following:
(i) Not later than 60 days after a case for which the individual has provided information has been referred for an audit or examination, a notice with respect to such referral.
(ii) Not later than 60 days after a taxpayer with respect to whom the individual has provided information has made a payment of tax with respect to tax liability to which such information relates, a notice with respect to such payment.
(iii) Subject to such requirements and conditions as are prescribed by the Secretary, upon a written request by such individual—
(I) information on the status and stage of any investigation or action related to such information, and
(II) in the case of a determination of the amount of any award under section 7623(b), the reasons for such determination. Clause (iii) shall not apply to any information if the Secretary determines that disclosure of such information would seriously impair Federal tax administration. Information described in clauses (i), (ii), and (iii) may be disclosed to a designee of the individual providing such information in accordance with guidance provided by the Secretary.
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The whistleblower lawyers at Zuckerman Law have experience representing whistleblowers before the IRS and one of our attorneys is also a Certified Public Accountant and Certified Fraud Examiner. We are a leading whistleblower law firm and two of our attorneys were named top whistleblower lawyers in Washingtonian magazine.
U.S. News and Best Lawyers® have named Zuckerman Law a Tier 1 firm in Litigation – Labor and Employment in the Washington DC metropolitan area. Matthew Stock, the Director of the Whistleblower Rewards Practice at Zuckerman Law, has been quoted in leading publications about the IRS whistleblower program, including in Bloomberg BNA.
To discuss potential representation in a tax fraud whistleblower case with amounts in dispute of more than $2 million, click here or call us at (202) 930-5901.
What is the process to obtain an IRS whistleblower reward?