Tipsters in IRS Whistleblower Reward Program May Receive Cash for Tax Fraud Info By Tod Aronovitz | 04/23/14 | 0 Comment

As we previously discussed on our ARONOVITZ LAW blog post on February 15, 2013 titled “IRS Whistleblower Program Offers Rewards for Reporting Tax Cheats,” you may be able to get in on a whistleblower award if you report tax fraud to the IRS.

The IRS offers two whistleblower reward programs. One program pays as high as 15% of the tax recovered in cases involving less than $2 million of tax. The other, launched in 2006, will compensate you up to 30% of tax recouped for cases concerning amounts of more than $2 million.

In its latest report to Congress, the Internal Revenue Service pointed out that the agency awarded $53 million to whistleblowers in fiscal 2013. The rewards follow agency collections of $367 million based on tipsters’ valuable information, according to a Wall Street Journal article titled, “IRS Pays Awards to Whistleblowers,” on April 18.

The 2013 figures came in lower than 2012’s $592.5 million collected and $125 million in whistleblower awards. However, the agency reports a healthy pipeline of open cases from 1,320 whistleblowers regarding 12,192 taxpayers—either individuals, corporations, trusts or estates.

Based on data in the report, an analyst in the WSJ article estimated the IRS could be in the early or middle stages of taking action on two-thirds of those submissions. The remaining one-third of the cases may be nearing the end of the review process. Industry observers expect that rewards may be presented in perhaps three cases in the near future.

However, resolution of an IRS whistleblower case is frequently time-consuming. Some cases have been known to take as long as 5 to 7 years to settle. There are a variety of reasons for this prolonged process including:

1. Four layers—minimum—of IRS review

2. Audits are extensive, some taking years to complete

3. Lengthy IRS decision process—at least several months—on whether to accept submissions and use the information

4. The IRS cannot pay whistleblowers until the questionable taxpayer no longer has a right to appeal or seek a refund, which can take two additional years

5. Other delays may arise

The IRS also reported that 30 whistleblowers may not receive rewards at all because the taxpayers are unable to pay their debt. The agency only presents awards on cases in which it receives the money owed.

Nonetheless, payouts can be worthwhile. In 2012, the IRS rewarded a single whistleblower, Bradley Birkenfeld, $104 million, the WSJ reported. He provided information about Swiss banking corporation UBS, triggering a vast undertaking against undeclared offshore accounts held by U.S. taxpayers in Switzerland and elsewhere. There was also a large IRS payout in 2013. An anonymous whistleblower received $38 million in connection with a corporate-tax case in the U.S.

Whistleblower awards are considered taxable like ordinary income and are traditionally taxed at 28% on the entire payment unless a special agreement is arranged.

How to Act as a Whistleblower

Professionals, employees, and others with specialized knowledge of questionable billing or tax practices involving a federal, state, or local government agency can file a confidential legal claim under the False Claims Act. By acting as a “whistleblower” in what is known as a “qui tam” lawsuit, a private party may collect between 10 to 30 percent of the amount recovered, depending on how the case is prosecuted.

ARONOVITZ LAW: Miami Whistleblower / Qui Tam Law Firm

The Miami Qui Tam law firm of ARONOVITZ LAW routinely works with whistleblowers to document Medicare fraud and other forms of fraud against the government. Contact Miami Whistleblower / Qui Tam lawyer Tod Aronovitz to discuss your case.