IRS Whistleblower Program & Rewards

The IRS Whistleblower Program provides monetary incentives for individuals who voluntarily provide the specific 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 rewarded up to 30% of the additional tax penalty and other amounts the IRS collects.

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 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

The IRS will, as a matter of policy, make every effort to keep the whistleblower’s identity anonymous. However, the commitment to anonymity is qualified, and the IRS tells whistleblowers that it may identify them 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 to determine and advise you whether it is likely that you would be called as an essential witness should the IRS take the tax whistleblower case to trial. Eric Young secured the first ever mandatory tax whistleblower reward of $4.5 million for an accountant client, and we were able to protect maintain our client’s anonymity. To to this day, the public is still unaware of the identity of the person who received the first IRS tax whistleblower reward as a result of our efforts.

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, then known as the Young Law Group, represented the first recipient of an award under section 7623(b) by the Internal Revenue Service 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 §7623(b).

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 out $4.5 million for the information. Eric also served as an expert in the case for the $104 million award for 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

An individual who wants to report the underpayment of taxes under the whistleblower program must complete IRS Form 211 and send it to the Whistleblower Office at the Internal Revenue Service. 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 the allegations and the amount believed to be owed to the government.

After submitting Form 211 to the IRS, it is first determined whether the claim exceeds $2 million. For claims involving 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. If an examiner needs clarification about the submission, or believes the whistleblower might have additional information, they will arrange an interview with the whistleblower.

Awards

At the conclusion of an investigation, the IRS Office completes a case file for processing as well as a claim file for the whistleblower award in conjunction with Form 11369. This form, the Confidential Evaluation Report on Claim for Reward, is sent to the IRS Whistleblower Office for determination of the award by the Director of the Whistleblower Office. Once the IRS has recovered the amount owed, the Initial Claim Evaluation (ICE) unit will ensure that the whistleblower has no outstanding tax returns or tax liability before issuing an award. For additional details, visit the IRS website 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 U.S. citizen or resident. If a portion of the 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 U.S. income tax treaty. If an award is denied, 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 United States Tax Court allowed a whistleblower to remain anonymous while appealing the determination of their award under § 7623. See Whistleblower 14106-10W v. Commissioner of Internal Revenue, 137 T.C. No. 15.

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 might 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. 

Government Employees

Federal, state, and local government employees can not submit to the program. They are not eligible to receive a reward.

Lawyers & Accountants

When an attorney or Certified Public Accountant provides information to the IRS, the IRS will return information that is protected by privilege to the whistleblower.

Foreign Individuals

There is no citizenship requirement for payment of an IRS whistleblower award. The IRS considers fighting international tax evasion a top priority. Estimates are that the United States loses $100 billion in revenue due to offshore tax evasion.

Media Commentary

The IRS Pays Whistleblowers to Turn in Tax-Evaders, Yahoo Finance, February 24, 2017

TAS Calls for Earlier Start for Whistleblower Proceedings, Tax Analysts – January 7, 2016

Blowing the Whistle on Tax Cheats, Wall Street Journal, September 4, 2015

IRS Releases Whistleblower Final Regs, Andrew Velarde, Tax Analysts Tax Notes Today, August 8, 2014

Roundtable Favors Changes to Ethics Code for Accountants to Allow Reporting of Illegal Acts – Accounting Today, July 10, 2014

A course correction for IRS whistleblower program – The Hill – March 12, 2013

More whistleblowers reporting suspected tax fraud to the IRS – New England In-House – May 2, 2012

IRS Stingy With Whistleblower Payouts, Slow to Follow Up on Tips – Bloomberg, October 4, 2011

IRS Whistleblower Program Faulted – The Wall Street Journal – September 10, 2011

How to Turn In a Tax Cheat – Marketwatch, September 6, 2011

Taxes: How To Turn In Your Neighbor to the IRS – The Wall Street Journal – September 3, 2011

$4.5M whistleblower award for CPA – Accounting Today, May 1, 2011

First payment made to an IRS whistleblower – CPA Magazine April 12, 2011

Whistleblower given $4.5m award by IRS – Boston Globe, April 9, 2011

IRS Awards $4.5M to Whistleblower – Fox News, April 08, 2011

Accountant Wins Tax Whistleblower Award, Counsel Says – Compliance Week, April 08, 2011

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