The IRS Whistleblower statute provides for a generous award to whistle blowers who report information on Tax Fraud or underpayment of taxes to the IRS. If you have information regarding tax fraud, including the underpayment of federal taxes, you may be entitled to a reward.  On December 20, 2006, the President signed the Tax Relief and Health Care Act of 2006 (the “Act”), which dramatically strengthened the IRS’s whistle blower program.  The Act increased available rewards and created an enforcement mechanism for whistleblowers to collect them.

To qualify, whistleblowers must provide information about tax fraud or tax underpayments by individuals or businesses whose gross annual income exceeds $200,000 and whose potential indebtedness for taxes, penalties and interest is greater than $2 million.  If the IRS pursues an administrative or judicial lawsuit against a taxpayer based on information brought by a whistleblower, the whistleblower is entitled to a reward of between 15% and 30% of the recovery.  There is no cap on the dollar amount of the reward.  The statute allows the whistleblower to appeal a reward to the U.S. Tax Court if the IRS fails to recognize the whistleblower’s contribution.

The statute also places a 10% cap on whistleblower rewards where there have been prior public disclosures of the allegations.  Rewards can also be reduced if the whistleblower planned and initiated the tax fraud or tax underpayment.

It is important to note that the IRS will keep the whistleblower’s identity confidential and that the IRS pays rewards after it completes its investigation into the tax fraud or tax underpayments, collects the amounts owed, and officially closes the case.

If you have information about tax fraud that exceeds $2 million and would like to know how the lawyers of Ashcraft & Gerel LLP can help you with your case, please either email us, complete and submit the “Contact Us” form on the left side of this page or call us at 301-459-8400 or toll free 1-888-221-6529. If you call, please ask for Jamie Bennett or Melissa Roover.