Reporting tax evasion or other forms of noncompliance can be an arduous, and ultimately unsuccessful, endeavor, so The Wall Street Journal offered a guide for those who seek to step forward as whistleblowers.
The IRS Whistleblower Office exists to “effectively promote voluntary compliance and reduce the tax gap by providing excellent service to whistleblowers, taxpayers, and other stakeholders.” Obtaining a reward requires patience, persistence, and an understanding of tax-law intricacies, IRS rules and procedures, the Journal reported. While tipsters usually have had to wait many years for their rewards, an IRS spokesperson told the paper that it is “actively looking for opportunities to pay awards sooner within the framework of the regulations.”
To submit a claim, an individual must complete IRS Form 211 and send it by U.S. mail to the IRS office in Ogden, Utah. “We are currently working with our Enterprise Solutions teams on a digital intake portal for the Form 211,” the spokesperson told the Journal. “We’re also making efforts to make the Form 211 in digital form.”
The form must contain detailed, credible information that the IRS does not have and can use to collect revenue, the Journal reported. Filing anonymously is not allowed, as the whistleblower’s original signature must be included, under penalty of perjury. More details on the process are available on IRS Publication 5251.
The size of the reward depends on the details of each case. But it “generally falls between 15 and 30 percent of the proceeds collected and attributable to the whistleblower’s information,” according to the IRS. “Awards can only be issued once a final determination can be made, and as such, award payments cannot be made until the taxpayer has exhausted all appeal rights and the taxpayer no longer can file a claim for refund or otherwise seek to recover the proceeds from the government.”
A new large-dollar program was created by Congress in 2006. The disputed proceeds must exceed $2 million and, if the subject of the claim is an individual, that person’s gross income must also exceed $200,000 for any taxable year subject to the action. The first successful action under this program occurred in April 2011, when a whistleblower was awarded $4.5 million for netting the IRS $20 million.
The IRS mailed the whistleblower a check for the amount of the reward, minus 28 percent in income tax.
The IRS reported a surge in reward payments in the latest 10 months through July, the Journal reported. In that period, the IRS has paid awards of $75.1 million based on collection of more than $274.6 million, according to its Whistleblower Office. In 2018, the IRS paid 217 awards totaling a record $312.2 million.
The IRS said that it took an average of 11.24 years from receipt of a claim to an award payment in fiscal 2022 under this large award program. The average wait in smaller cases was 9.79 years.
“While it’s true the average award payment cycle time has increased, it’s also true that during that time, the Service had less resources for the examination, collection and other enforcement actions which contributed to the longer process cycle times,” the IRS spokesperson told the Journal.
More information is available in the IRS Whistleblower Office Annual Report to Congress for fiscal year 2022.