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Important Things to Know About The IRS Whistleblower Program

Important Things to Know About The IRS Whistleblower Program

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IRS Whistleblower Program – More than $499 Million in Whistleblower Monetary Awards

According to the recently released “IRS Whistleblower Program Fiscal Year 2017 Annual Report to Congress”:

  • Since 2007, information submitted by whistleblowers has assisted the IRS in collecting $3.6 billion in revenue.
  • The IRS has approved more than $499 million in monetary awards to whistleblowers.
  • In FY 2017, the IRS Whistleblower Office made 242 awards to whistleblowers totaling $33.9 million (before sequestration), which includes 27 awards under IRC § 7623(b), representing a 50% increase in the number of IRC § 7623(b) awards as compared to 18 awards paid in FY 2016.
  • Award dollars to whistleblowers as a percentage of amounts collected increased to 17.8% from 16.6%.
IRS Whistleblower Program Overview & Whistleblower Program Award Criteria

The IRS Whistleblower Office operates at the direction of the Commissioner of the IRS and coordinates with other IRS units, analyzes information submitted, and makes award determinations.

If a submission does not meet the criteria for IRC § 7623(b) consideration, the IRS may consider it for an award pursuant to its discretionary authority under IRC § 7623(a).

An IRS whistleblower must meet several conditions to qualify for the IRC § 7623(b) award program. According to the IRS Whistleblower Program Annual Report, the information must be:

  • Signed and submitted under penalties of perjury;
  • Related to an action in which the tax, penalties, interest, additions to tax, and additional amounts in dispute exceed $2,000,000; and
  • Related to a taxpayer, and for individual taxpayers only, one whose gross income exceeds $200,000 for at least one of the tax years in question.

If the information meets the above conditions and substantially contributes to an administrative or judicial action that results in the collection of tax, penalties, interest, additions to tax, or additional amounts, the IRS will pay an award of at least 15 percent but not more than 30 percent of the collected proceeds resulting from the administrative or judicial action (including related actions).

The award percentage decreases for cases based principally on information disclosed in certain public sources or when the whistleblower planned and initiated the actions that led to the underpayment of tax.

Whistleblowers may appeal the IRS Whistleblower Office’s award determinations under IRC § 7623(b) to the United States Tax Court.

The IRS pays awards from collected proceeds, and as such, payments cannot be made until the taxpayer has exhausted all appeal rights and the taxpayer no longer can file a claim for refund. Therefore, typically the IRS does not make award payments for several years after the whistleblower has filed a claim.

IRS Whistleblower Claims Under IRC § 7623

In August 2014, the U.S. Treasury and IRS published final regulations, which, among other things, provide guidance on submitting information regarding tax underpayments or violations, filing claims for award, and the whistleblower administrative proceedings applicable to claims for award under IRC § 7623. The regulations also provide guidance on the determination and payment of awards, and provide definitions of key terms used in IRC § 7623.

The final regulations published in the Federal Register can be viewed by clicking Awards for Information Relating to Detecting Underpayments of Tax or Violations of the Internal Revenue Laws.

The IRS Whistleblower “Informant Award” website page also contains detailed information about the IRS Whistleblower Office and Whistleblower Claims.

The Whistleblower Program Annual Report contained the following data reflecting IRS Whistleblower Program amounts collected and awarded in FY 2015, FY 2016, and FY 2017:

IRS Whistleblower Program Fiscal Year Award Data

NOTE: The IRS Whistleblower Program Annual Report reflected that whistleblower award and claim data is reported as of September 30, 2017, and “Total Amounts of Award” is before the sequestration reduction.

IRS Whistleblower Program Claims – FY 2017 Closed Whistleblower Claims

According to the IRS Whistleblower Program Annual Report, in FY 2017, the IRS Whistleblower Office closed 14,445 claims, a 31.6 percent decrease from FY 2016 closures.

The most common factors for whistleblower claim closures were:

  • Rejected claims with either a non-specific, non-credible, or speculative allegation.
  • The issues were below the threshold for IRS action.
  • The information was already known to the IRS, lack of resources to pursue a claim, or due to a survey (no tax effects).
  • Claims denied due to insufficient time remaining on the statute of limitations or the statute expired before IRS Form 211 (“Application for Award for Original Information”) was submitted.
IRS Whistleblower Actions – Eligibility & Submitting a Whistleblower Claim
Who is eligible for an IRS Whistleblower Award?

The IRS may pay awards to individuals who provide specific and credible information to the IRS if the information results in the collection of taxes, penalties, interest or other amounts from the noncompliant taxpayer. The IRS wants “solid information,” not speculative or unsupported claims, regarding significant federal tax issues.  The IRS Whistleblower Program is not designed to resolve personal tax problems or business disputes.

What are the whistleblower rules for getting an IRS Whistleblower Award?
Amount in Dispute Greater than $2 million

If the taxes, penalties, interest and other amounts in dispute exceed $2 million, and a few other qualifications are met, the IRS will pay 15 percent to 30 percent of the amount collected.  If the case deals with an individual, his or her annual gross income must be more than $200,000. If the whistleblower disagrees with the outcome of the claim, he or she can appeal to the Tax Court. These rules are found at Internal Revenue Code IRC Section 7623(b) – Whistleblower Rules.

Amount in Dispute Below $2 million or Gross Income Less than $200,000

The IRS also has an award program for other IRS whistleblowers, which, generally, is for those who do not meet the $2 million in dispute threshold or for cases involving individual taxpayers with gross income of less that $200,000. The awards via this program are less, with a maximum award of 15 percent up to $10 million. Further, the awards are discretionary, and the informant (whistleblower) cannot dispute the outcome of the claim in Tax Court. The rules for these cases are found at Internal Revenue Code IRC Section 7623(a) – Informant Claims Program, and some of the rules are different from those that apply to cases involving more than $2 million.

Individuals Who Have Information About Tax Fraud Committed Against the U.S. Government

If you have information or evidence of tax fraud committed against the United States government and would like to speak privately with an attorney about filing an IRS whistleblower claim, please complete the form above on the right, e-mail [email protected] or contact a Kehoe Law Firm attorney.

Kehoe Law Firm, P.C.