Under certain circumstances, the IRS and SEC/CFTC whistleblower programs allow whistleblowers to proceed without an attorney. However, beacuse there are important considerations when deciding how to proceed, it is advisable to contact an experienced whistleblower attorney.
The passage of the Tax Relief and Health Care Act of 2006 by Congress made significant alterations to the previously existing tax whistleblower program, providing informants with much greater incentive to report knowledge of tax fraud to the IRS. Prior to 2006, the IRS had full discretion on payouts, and you could not appeal its determination of your reward. The new law substantially raised the maximum potential reward and creates an appeals process to ensure these awards are fairly determined.
IRS Whistleblower Program Provisions
The new guidelines set forth under the Tax Relief and Health Care Act of 2006 were designed to target large tax underpayments. Therefore, in order to qualify for the Tax Whistleblower Program, your knowledge must lead to the recovery of at least $2 million in taxes, penalties, and interest. If the tax evader is an individual, his annual gross income must exceed $200,000. There is no annual gross income requirement for corporations. Since there is no cap on the size of the reward, your percentage can be quite lucrative depending on the amount of the underpayment.
If you provide the IRS with information about tax underpayment which results in the recovery of unpaid taxes, you can receive between 15% and 30% of the proceeds recovered by the IRS, including penalties and interest. The percentage you are awarded will be based on your contribution to the case. Therefore, to ensure that you maximize your tax reward, it is crucial that you provide the IRS with detailed information and continue to assist them throughout the investigation. Your report should include:
If your claim falls short of these requirements, it will be handled under the discretionary award statutes in place prior to 2006. You may still receive an award, but any such award would be at the sole discretion of the IRS.
Timeframe for Filing a Claim
IRS whistleblower claims are highly time sensitive. The statute of limitations for these cases varies a great deal with regard to the nature of the tax underpayment being reported. You need an experienced attorney to determine whether or not your claim is timely.
There is another important reason to act quickly. The IRS will only issue a reward to the first informant who provides them with information regarding any instance of tax fraud. Therefore, if someone else comes forward with information about the same tax violation before you do, you will not be eligible to earn a reward.
Click here to see the law in writing.