Rewards for Tax Fraud Whistleblowers
The IRS whistleblower law is similar to the False Claims Act in that the citizen whistleblower may receive an award between 15 to 30% of the amount the IRS collects as a result of the information. However, the information provided must involve tax fraud or underpayments that exceed $2 Million, counting the tax, penalties and interest. Also, the annual income of an individual tax cheater must be greater than $200,000.
Also unlike the False Claims Act, if the IRS decides not to pursue a fraud case, the whistleblower does not have the right to pursue it with his or her own attorneys. The IRS is compelled by law, similar to the SEC and CFTC for investments or commodities fraud, to keep the identity of whistleblowers confidential, if they follow the correct procedure.
Cases involving less than $2 Million of tax fraud may be rewarded by the IRS under the “small-awards program”, where the awards can technically be as high as 15% but often are much less. Our firm is simply too busy to get involved with potential tax fraud cases that may only qualify for the small-awards program.
Regrettably, the IRS whistleblowing law has no anti-retaliatory protection provisions for the whistleblower, unlike the False Claims Act and the Dodd-Frank securities whistleblowing law. Thus, extra caution and guidance by experienced counsel can be even more important.