IRS Whistleblower Program & Rewards

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

In Fiscal Year 2019, the IRS Whistleblower Office collected proceeds totaling $616.8 million and awarded more than $120 million to whistleblowers.

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. In cases involving individual taxpayers, their annual gross income must exceed $200,000 for at least one of the tax years at issue.
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 The Identity of Whistleblowers

The IRS makes every effort to protect the anonymity of whistleblowers as a matter of policy. However, that commitment is conditional, and the IRS informs whistleblowers that their identity could be revealed if they are designated as an essential witness in a judicial proceeding, or if ordered to do so by a court of competent jurisdiction. An experienced tax whistleblower attorney can evaluate your circumstances and assess the likelihood of you be called as an essential witness should the IRS take the case to trial. Eric Young, the managing partner of the firm’s whistleblower department, secured the first-ever mandatory tax whistleblower reward of $4.5 million for his client. That client 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 Purtell Merritt, 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 the company dodged the accountant’s questions for two years, Eric took on the case and filed a whistleblower claim. As a result of the information provided, the IRS issued a $4.5 million reward.

Eric also served as an expert in a case involving a $104 million award to international private banker, Bradley Birkenfeld. Eric is widely recognized for his work in the field and is often approached by media publications for interviews and commentary whenever news breaks on the IRS whistleblower program.

Reporting IRS Fraud to the Office of the Whistleblower

The IRS accepts information involving tax law violations by filing Form 211, which must be carefully completed and sent to the IRS Office of the Whistleblower. Form 211 requests information about the whistleblower making the report; the entity allegedly underpaying or evading taxes; any relationship between the whistleblower and the entity; and details relating to the alleged misconduct. Whistleblowers must explain how they learned of the tax fraud and provide evidence supporting their allegations. The IRS also requests an estimate the amount of unpaid tax owed by the delinquent taxpayer.

After receiving Form 211, the IRS initially determines whether the claim exceeds $2 million. If the amount at issue is 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) of the Internal Revenue Code. Any reward issued under Section 7623(a) is based on the discretion of the IRS.

Whistleblower claims exceeding $2 million are assigned a claim file number and the IRS notifies the whistleblower and/or his or her attorney. Claims of more than $2 million are handled under Section 7623(b) which makes the issuance of an award mandatory under the IRS Code in cases where there has been a successful recovery.

During the investigation of a whistleblower claim, an IRS examiner might need clarification about the submission or seek additional information that could assist in the investigation. In those situations, the IRS will schedule an interview with the whistleblower and his or her attorney.

“[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 Taxpayer First Act of 2019

The Taxpayer First Act of 2019 was signed into law on July 1, 2019, and added several important provisions to Section 7623(a) of the Internal Revenue Code. For any whistleblower who provides information related to any purpose set forth in the first two paragraphs of Section 7623(a), the IRS Whistleblower Office will disclose whether the whistleblower’s claim was referred for audit or examination and whether a tax payment was made with respect to any issue raised by the whistleblower.

If a written request is made, the Whistleblower Office will also provide information as to the stage and status of an investigation or action related to the whistleblower’s information. For example, the IRS will report information such as: whether a claim resulted in an audit; whether an audit has concluded; the existence of any collected proceeds; and whether the case has been suspended. Finally, when a determination of the amount to be awarded under section 7623(b) is made, the Whistleblower Office will provide the reasons for that determination.

Another amendment to the Taxpayer First Act expanded the IRS’ ability to exchange information with respect to disclosures made to whistleblowers where such disclosures would assist in an investigation.

Protection from Retaliation

The Taxpayer First Act amended the Internal Revenue Code to extend anti-retaliation protections to employees who provide tax-related information about their employers to the IRS. The procedures for a whistleblower retaliation claim under the Taxpayer First Act are very similar those in the Sarbanes-Oxley Act.

Beginning on July 1, 2019, the Occupational Safety and Health Administration (OSHA) will handle complaints of retaliation against employees who report violations of the Internal Revenue Code as well as other federal statutes. The Taxpayer First Act also prohibits retaliation against employees who testify, assist, or participate in any administrative or judicial action taken by the IRS involving tax fraud or other violation of the Internal Revenue Code.

Awards Under the IRS Whistleblower Program

At the conclusion of an investigation, the IRS will issue a decision letter if an award will be issued under Section 7623(a). If a claim is rejected or an award is denied, the agency will provide written notice that sets forth the basis for the rejection. The Whistleblower Office is not required to respond to requests for additional information on claim rejections, denials, or award payments made under Section 7623(a).

For claims under Section 7623(b), the IRS will issue a notice of determination when a claim is rejected or denied, and it will provide a basis for that decision. If an award is recommended, the IRS will provide the whistleblower with a written explanation of the factors that contributed to the recommended amount of the award as well as a summary of how the whistleblower’s information affected the underlying investigation or action. After a final determination of the amount to be awarded, the Whistleblower Office will respond to written requests that seek the reasons for the determination of the amount of the award.

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

Remaining Anonymous When Filing A Complaint

The IRS treats whistleblowers as confidential informants and protects their identity to the fullest extent permitted by law.

“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.