No one loves the idea of paying taxes, but the vast majority of us recognize that it is our civic and legal responsibility to do so. When one individual or company cheats on its taxes, it’s the rest of us honest citizens who literally pay the price while the tax cheats make off like bandits. Home loan programs, college loan programs, cancer research, military forces, and highway construction all depend on tax dollars.Those who defraud the Internal Revenue Service force the rest of us to pick up the tab.
Although tax fraud is exempted from pursuit under the False Claims Act, the Internal Revenue Code has since 1987 permitted the IRS to provide discretionary rewards to tax whistleblowers. Certain rewards became mandatory when Congress passed the Tax Relief and Health Care Act of 2006, requiring that the IRS establish a separate Whistleblower Office and providing appeal rights to whistleblowers who are denied or unhappy with an award. To reward the courageous individuals willing to take a stand against tax fraud, the IRS whistleblower program rewards individuals presenting credible evidence of tax fraud with up to 30% of the taxes and penalties it collects. Thus, if a whistleblower brings evidence of an organization that has underpaid its taxes by millions of dollars, resulting in a total $10 million judgment, the whistleblower may be able to collect up to $3 million of those funds. While the IRS awards are often not made public, in 2013 an employee of UBS was awarded $104 million by the IRS for his role in exposing tax fraud at the company.
The IRS program now consists of both discretionary and mandatory awards. To be eligible for the more lucrative mandatory award program, a whistleblowers’ allegations must result in the IRS recovering from an organization combined tax, interest, and penalties of at least $2 million. If the wrongdoer is an individual taxpayer, he or she must have gross income in excess of $200,000 annually. In such cases, the IRS will pay between 15% and 30% of the amount it recovers to the responsible whistleblower. For disputes under $2 million or where an individual makes less than $200,000 a year, the IRS may pay up to 15% to the whistleblower under its discretionary program. Keep in mind that the penalties that the IRS may assess in a tax fraud case may be much higher than the tax actually owed, and the whistleblower will share in that recovery.
If being a ‘team player’ means doing something unethical, immoral or just plain wrong, you are on the wrong team.
Bringing an IRS Whistleblower Claim
The process for an IRS whistleblower claim begins with the whistleblower collecting all the relevant evidence of the wrongdoing and assembling it for submission to the IRS. This is a complicated process, and many unsuccessful claims suffer from a lack of properly presented evidence. You can read more about the IRS Whistleblower Office or review the Whistleblower Program Rules.
The IRS will evaluate the submission for potential investigation, and then may proceed with an action to investigate and recover taxes, interest and penalties. The IRS will work to protect whistleblower confidentiality during the process, which will take several years. Working with an experienced IRS whistleblower lawyer can be of tremendous benefit in presenting a successful recovery. An experienced IRS whistleblower attorney can work with the IRS to guide the agency through the submission and investigation and potentially speed up the process of obtaining a successful recovery.
At Kreindler and Associates, we have been working for over 15 years with courageous individuals who have brought fraud to light. If you have evidence of tax fraud, contact us today, and we will help evaluate your allegations and work you with every step of the way.