How do I blow the whistle on tax fraud?
Every year, people and companies in the United States cheat on their taxes. The IRS has a special term for the amount of taxes that go unpaid each year. It’s called the “Tax Gap,” which means the amount of true tax liability faced by taxpayers that is not paid on time.
The IRS estimates the annual Tax Gap to be $450 billion. Wow! Forget about raising taxes, just think of the problems the Government could solve if it just collected the taxes that people actually owe right now.
To close the Tax Gap, the IRS has instituted several programs, including the IRS Whistleblower Program
Here’s how the program works.
If a whistleblower knows that a person or company has cheated on its taxes, the whistleblower can submit his or her information to the IRS on a form called the IRS Form 211. The form acts like a tip to the IRS. If the IRS acts on the information and eventually collects back taxes from the taxpayer, the whistleblower can receive a reward of up to 30% of the collected proceeds.
Here’s what you need to know about the program.
First, the program is run by overworked and underpaid Government employees. These IRS employees receive hundreds of whistleblower tips, so it is important to make your tip stand out from the crowd.
Second, you should not attempt to submit a tip without the aid of a lawyer, who is skilled and knowledgeable in submitting whistleblower complaints to the IRS. A lawyer will help your complaint look serious and professional. The information needs to be presented on a silver platter for the Government.
Third, because IRS resources are so limited, the IRS will rarely waste its time with small amounts of unpaid taxes. Indeed, the IRS whistleblower program only applies if the unpaid taxes at issue are above $2 million. The IRS wants to spend its limited resources in the manner that will give the biggest return. This means big amounts of unpaid taxes against big companies, preferably Fortune 500 companies.
Fourth, the program takes an extremely long time. This is because the taxpayer has to go through an audit, and has the rights to challenge the results of the audit, and to go to tax court. This could take years. The whistleblower does not get paid until after the Government gets paid.
Fifth, unlike other whistleblower programs, the whistleblower has no right to prosecute the tax fraud claim if the IRS says no. If the IRS decides the tip is not valid, or that the case is too small, or that they don’t have enough agents to investigate your tip, that’s it. The IRS simply closes the case, and gives no explanation for the decision.
But don’t be too discouraged. In recent years, the IRS has been more successful in acting upon whistleblower tips. If you believe you know about tax fraud above $2 million, feel free to contact our firm for a free and confidential evaluation of your case and your options.