IRS Amends Rules to Enlarge Whistleblower Awards

Nov 10, 2014 By Evan Nielsen In Taxation No Comment Tags : , ,

Did you know that the IRS offers money to individuals who inform on those who are cheating on their taxes? It’s called whistleblowing, and the Internal Revenue Service has an entire branch, the Whistleblower Office, dedicated to the matter. The agency can pay you up to 30 percent of any additional tax, penalty, or other amount it collects as a result of the information it receives from you.

The largest whistleblower reward paid out to a single individual was paid to Bradley Birkenfeld, a former employee of the Swiss Bank, UBS. Mr. Birkenfeld was awarded $104 million dollars after the information he learned while employed by the bank lead to the discovery of billions of American dollars being hidden in Swiss UBS accounts. The IRS ultimately entered into a settlement agreement with UBS, with the bank paying $780 million in fines, penalties, interest, and restitution.

While most of us won’t stumble upon a million dollar tax fraud to report, if you do have credible information, not simply speculation, a guess, or a hunch, regarding a significant Federal tax issue, you can alert the IRS of the problem and become an agency informant by filling out and submitting IRS Form 211.

The IRS hopes to encourage individuals to alert the tax-collecting agency to misconduct. In August of 2014, the IRS issued regulations that widen whistleblower awards. The new rules:

  • Change the definition of “collected proceeds” to include not just the number of dollars collected, but also the dollar amount of any decrease in a net operating loss (“NOL”)
  • Remove state and local government employees from the category of ineligible whistleblowers
  • Enlarge the definition of when the IRS “proceeds based on” the information received from a whistleblower to “proceeds based on information provided that substantially contributes” to the action

The IRS has complete discretion as to whether it awards a whistleblower payment for their information. The amendments are designed, in part, to tighten the belt on some of that discretion.

If you believe you have information that may lead the IRS to the detection of tax evasion or other misconduct and have questions as to how to proceed, the professionals at Nielsen Law Group are ready to assist you. Call (480) 888-71111 or submit a web request here.