IRS Whistleblower Program
The IRS Whistleblower Program offers monetary incentives to eligible 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 non-compliant taxpayer, an eligible whistleblower can receive between 15% and 30% of the amount collected as a result of the information provided by the whistleblower.
Since 2007, the IRS Whistleblower Program has successfully recovered $6.39 billion from tax violators while issuing more than $1 billion in awards to whistleblowers. In Fiscal Year 2021, the IRS Whistleblower Office collected proceeds of more than $245 million and made 179 award payments to whistleblowers totaling more than $36 million.
Mandatory and Discretionary Whistleblower Awards
Section 7623 of the Internal Revenue Code authorizes awards for eligible whistleblowers who provide information that results in the collection of proceeds based on violations of the tax code. The IRS Whistleblower Office process awards under section 7623(a) or 7623(b) of the Internal Revenue Code.
To qualify for an award under section 7623(b), the information provided by the whistleblower must involve disputed tax obligations (including taxes, penalties, interest, and additions to tax) exceeding $2,000,000. If the information relates to an individual taxpayer, the gross income for that taxpayer must exceed $200,000 for at least one of the tax years at issue.
Any whistleblower submission that doesn’t qualify under section 7623(b) is processed by IRS Whistleblower Office under section 7623(a) of the Internal Revenue Code. Any award under section 7623(a) is discretionary, and there is no minimum statutory award percentage. In addition, there are no appeal provisions for the denial of a claim or the amount awarded to the whistleblower.
Protecting The Identity of Whistleblowers
The IRS treats whistleblowers as confidential informants and makes every effort to protect the anonymity of whistleblowers as a matter of policy. It will neither confirm nor deny the existence of a whistleblower in discovery requests when the whistleblower is not listed as a witness. However, an adverse discovery ruling by a court could lead to the disclosure of information that could indirectly reveal the identity of a whistleblower.
Despite the agency’s commitment to maintaining the anonymity of whistleblowers, there are other circumstances when a whistleblower’s identity could be disclosed. For example, if a whistleblower is identified as a witness and called to testify in judicial proceeding, the IRS must comply with an order issued by a court.
An experienced tax whistleblower attorney can evaluate your circumstances and assess the likelihood that you might be called as an essential witness should the IRS take the case to trial.
Experience Matters
Eric Young is a nationally recognized IRS whistleblower lawyer who secured the first-ever mandatory tax whistleblower award on behalf of his client. Eric represented an anonymous accountant who had information about a tax evasion scheme involving a Fortune 500 company.
After the IRS investigated the information and secured a monetary recovery from the company, Eric’s client received an award of $4.5 million. This represented the first mandatory award issued under section 7623(b) of the Internal Revenue Code.
In 2012, former banker, Bradley Birkenfeld, received the largest ever IRS whistleblower reward — $104 Million — through the IRS Whistleblower Program for reporting that UBS facilitated illegal overseas tax shelters for wealthy Americans. Mr. Birkenfeld hired Eric Young to serve as his expert witness on the IRS Whistleblower Program in related litigation. Eric’s successes have earned him a reputation as one of the leading IRS whistleblower attorneys in the nation.
Protection from Employer Retaliation
The Taxpayer First Act of 2019 added anti-retaliation protection for whistleblowers similar to that provided by the False Claims Act and the Sarbanes-Oxley Act. The Act prohibits an employer, or anyone acting on an employer’s behalf, from terminating or retaliating against an employee who engages in protected activity covered by the Act. It also prohibits retaliation against employees who testify, assist, or participate in any administrative or judicial action involving tax fraud or other violations of the Internal Revenue Code.
The Occupational Safety and Health Administration is authorized to handle retaliation cases involving employees who report tax violations by their employers.
The penalties for violating the anti-retaliation provisions include “all relief necessary to make the employee whole” and compensatory damages such as reinstatement, 200% of any back pay and special damages like litigation costs, expert witness fees and reasonable attorney fees.