This summer, the Internal Revenue Service (IRS) changed the 140-year-old rules on how whistleblowers are compensated for information that leads to a successful collection of funds from tax evaders. The law should help incentivize those who witness tax evasion to come forward, despite the possible difficulties whistleblowers face.
New Whistleblower Rules Increase Monetary Awards
The IRS offers a monetary reward for those who provide information that leads to a successful investigation of a case of tax evasion. Whistleblowers may be entitled to up to 30 percent of what the IRS collects in taxes, penalties and other fees.
There are two types of awards depending on the amount involved in the evasion case. In those cases where over $2 million is collected and an individual tax evader makes over $200,000 annually, whistleblowers may be awarded between 15 and 30 percent of the money the IRS collects. If the whistleblower disagrees with the amount the IRS awards him or her, he or she can appeal the amount of the award.
If the tax evader makes less than these figures, the whistleblower may be eligible for an award up to 15 percent. In this circumstance, the IRS can exercise discretion on how much it awards and its decision is not disputable.
It is important to reiterate that whistleblower rewards are not automatic. The information provided by the whistleblower must result in a successful tax evasion investigation and collection of taxes, penalties, interest and other money owed. The whistleblower program is also not intended to resolve personal or business partner disputes, but fix a federal tax issue.
Whistleblowers Should Still Come Forward, Despite Obstacles
Often, whistleblowers are reluctant to report the tax evasion they witness because they fear retaliation from the evader. Methods of retaliation like harassment and intimidation do occur but the rewards, hopefully, will motivate people to report tax evaders despite possible retaliation. Hiring a whistleblower retaliation lawyer can help whistleblowers understand their rights regarding retaliatory tactics and aid in the whistleblower process.
In addition, whistleblowers should not be deterred from reporting tax evasion due to concerns about the IRS failing to follow through on whistleblower claims. While the IRS has dragged its feet on whistleblower claims in the past, the new laws should help speed up the claims process. In 2011, the agency only processed 100 claims, but has already processed 90 claims since October 2011 and has 60 more in process.
If you have witnessed tax evasion and wish to report it to the IRS, contact an experienced lawyer who can help you understand your rights as a whistleblower and help you obtain any award to which you may be entitled.