It is impossible to know exactly how much honest taxpayers are injured by parties who cheat on their taxes each year, but estimates put it at around $500 billion annualy. That means that every taxpayer must shoulder thousands of dollars apiece in tax burdens left by generally wealthy parties who attempt to avoid paying their fair share. There is a way to fight back against tax fraud while potentially earning an enormous financial payout for your efforts in the process. The IRS pays significant whistleblower awards to parties who provide the agency with information that leads to the collection of tax underpayments or penalties.
Over $2 Million: The IRS Will Pay 15% to 30% of the Proceeds Collected
Under Internal Revenue Code (IRC) 7623(b), the IRS shall pay a whistleblower between 15% and 30% of the total proceeds collected by the IRS, when that total amount is $2 million or more. This total amount includes not only payments of owed taxes, but also penalties, interest, addition to taxes, and other amounts. There is no upper limit on the total reward the IRS can pay to a whistleblower under the law.
Thus, in a case where the IRS collects $3,000,000 in total proceeds based upon a whistleblower’s information, the payment range would be between $450,000 and $900,000. The determination of whether to award near the bottom or top of that 15% to 30% scale will depend upon the extent to which the whistleblower contributed to the success of the IRS action.
What the IRS Pays in Cases Involving Less than $2 Million
For cases where the amount collected by the IRS is less than $2 million, the IRS may still pay a significant whistleblower award, which can be up to 10% of the total proceeds collected. Thus, in a case involving $1.75 million in collected proceeds, the IRS may pay up to $175,000.
In 2016, the IRS made 418 separate awards to whistleblowers, for a total of over $61 million in awards. This number represented a drop from $103 million in whistleblower awards made in 2015, but represented a 300% increase in total number of awards.
Other Factors That Can Affect Your Whistleblower Award Size
The IRC also indicates that the IRS may choose to reduce the size of a taxpayer award to 10% of collected proceeds when the information provided to the IRS by a whistleblower originated from:
- Judicial or administrative hearings;
- A government report, hearing, audit, or investigation; or
- The news media
The law also states a reduction can occur where the whistleblower “planned and initiated” the non-compliance with the tax code.
It is important to stress, however, that a takeaway here is that the IRS is willing to pay large financial rewards for information, even if it is not based on firsthand knowledge or if you played a role in non-compliance. Talk to an IRS whistleblower attorney about your specific situation and how you can go about pursuing your maximum whistleblower award.
How to Recover a Financial Reward While Protecting Taxpayers
At Kreindler and Associates, we have over 15 years experience working with courageous individuals to help bring harmful tax fraud to light. We will work with you every step of the way to make sure your claims are properly presented, that your confidentiality is protected, and that you receive the recovery you deserve as quickly as possible. If you have evidence of tax fraud or questions about how to report tax improprieties and receive a whistleblower award, contact us today and let Kreindler and Associates help you determine your best course of action.
