IRS Whistleblower Program & Rewards

The IRS Whistleblower Program provides monetary incentives for individuals who voluntarily provide specific and credible information about possible violations of the Internal Revenue Code. If the information results in the collection of taxes, penalties, interest, or other amounts from a noncompliant taxpayer, a whistleblower can be awarded up to 30% of the additional tax penalty and other amounts recovered by the IRS.

Types of Rewards

The IRS will pay 15 % to 30% of the amount collected if the taxes, penalties, interest and other amounts in dispute exceed $2 million, and in cases involving individual taxpayers whose annual gross income exceeds $200,000.
The IRS will pay up to 15% of the amount collected, up to $10 million, if the case involves an individual taxpayer with gross income of less than $200,000.

Protecting Whistleblower Confidentiality

As a matter of policy, the IRS will make every effort to keep the whistleblower’s identity anonymous. However, the commitment to anonymity is qualified, and the IRS informs whistleblowers that their identity could be revealed if they are an essential witness in a judicial proceeding, or if ordered to do so by a court of competent jurisdiction. A good tax whistleblower attorney can evaluate your case and determine whether it is likely that you would be called as an essential witness should the IRS take the case to trial. Eric Young secured the first-ever mandatory tax whistleblower reward of $4.5 million for his client, who remains anonymous to this day.

Our attorneys have helped clients report more than $500 million in unpaid taxes and tax liabilities to the Internal Revenue Service.

Eric L. Young

Eric Young is a nationally recognized IRS whistleblower lawyer. Eric and his law firm, formerly known as the Young Law Group, represented the first recipient of an award under section 7623(b) of the IRS Whistleblower Program. Following the firm’s name change to McEldrew Young, our Philadelphia attorneys continue to represent individuals in cases of tax fraud arising nationwide.

Eric Young represented the first ever recipient of an IRS award under the IRS Whistleblower Program.

Eric was approached by an accountant who informed the IRS about a tax evasion scheme at a Fortune 500 company. After two years of unanswered inquiries by the accountant, Eric went to work and the IRS paid $4.5 million as a result of the information. Eric also served as an expert in a case involving $104 million award to international private banker, Bradley Birkenfeld. Eric is widely recognized for his work in the field and is often interviewed by media publications when news breaks on the IRS whistleblower program.

Reporting IRS Fraud

A person who wants to report information about the underpayment of taxes must complete IRS Form 211 and send it to the IRS Whistleblower Office. Form 211 requests information about the whistleblower making the report; the entity allegedly underpaying taxes; any relationship between the whistleblower and the entity; and any alleged misconduct. Whistleblowers are asked to describe how they learned of the tax fraud; facts supporting their allegations; and the amount believed to be owed to the government.

After submitting Form 211, the IRS first determines whether the claim exceeds $2 million. For claims of less than $2 million in unpaid taxes or tax fraud, the information is forwarded to the Informant’s Claim Unit and handled under Section 7623(a). Rewards under Section 7623(a) are based on the discretion of the IRS. Information involving claims of more than $2 million are assigned a claim file number and notification is made to the whistleblower and/or his or her attorney. These claims are handled under Section 7623(b) which provides for a mandatory award under the Internal Revenue Code.

During review of the claim, an IRS examiner might need clarification about the submission or seek additional information that could assist the investigation. In those situations, the IRS will arrange an interview with the whistleblower.

In 2017, the Director of the IRS Whistleblower Office issued a memorandum following a review of IRS operating procedures regarding communications with whistleblowers. The memorandum noted that there “may be instances when ongoing interaction with a whistleblower during an examination can assist in the timely and correct resolution of issues.” The IRS is prohibited by law from disclosing confidential information contained on a tax return, and this prohibition often limits the scope of the whistleblower’s role in an IRS investigation.

“[T]here may be instances when ongoing interaction with a whistleblower during an examination can assist in the timely and correct resolution of issues.”

-Lee Martin, Director of the IRS Whistleblower Office

The memorandum explains that 26 U.S.C. § 6103(n) permits the IRS to enter into a contract with a whistleblower for services related to tax administration. After execution of a section 6103(n) contract, the IRS can share tax returns and return information with a whistleblower, and his or her attorney, to further the whistleblower’s participation in the investigation.

Awards

At the conclusion of an investigation, the IRS completes Form 11369, the Confidential Evaluation Report on Claim for Reward, which is sent to the IRS Whistleblower Office for determination of an award. After the IRS has recovered the amount owed, the Initial Claim Evaluation unit will ensure that the whistleblower has no outstanding tax returns or tax liability before an award is issued.

For additional details, visit https://www.irs.gov/compliance/whistleblower-informant-award for information about award determination proceedings or reduced rates of withholding.

Any award paid under the IRS Whistleblower Program is taxable income. The IRS will withhold tax from any payment to a US citizen or resident. If a portion of a reward will be paid to an attorney, the whistleblower can file for a reduced income tax withholding to reflect the decreased tax obligation. Nonresident aliens who receive an award under the program will also be subject to withholding unless they are exempt pursuant to a US income tax treaty. If the IRS denies an award, an appeal can be filed with the United States Tax Court.

Remaining Anonymous

The IRS treats whistleblowers as confidential informants and protects their identity to the fullest extent permitted by the law. In one case, the Tax Court allowed a whistleblower to remain anonymous while appealing the determination of an award under section 7623.

“The IRS takes the privacy of individuals and entities submitting tax returns very seriously.”

Even though confidentiality is protected, the IRS warns that a whistleblower could be identified as a witness and called to testify in judicial proceeding in certain cases. The IRS also has a policy that it will neither confirm nor deny the existence of a whistleblower in discovery requests where the whistleblower is not listed as a witness. However, an adverse discovery ruling could lead to disclosure of information that might reveal the identity of the whistleblower.