Many of our reports center on fraudulent billing practices against Medicare and Medicaid. However, the IRS also maintains a whistleblower program designed to incentivize those with first-hand knowledge of tax fraud to come forward, report their information, and collect a sizable percentage of any money recovered. In the paragraphs that follow, we take a look at whistleblower laws as they pertain to tax fraud, as well as the ways in which a whistleblower can benefit from making the decision to come forward.
Tax Relief and Healthcare Act of 2006
The Tax Relief and Healthcare Act (TRHA) of 2006 was signed into law by President George W. Bush. It is the first tax law of its kind to allow whistleblowers the opportunity to collect between 15 and 30 percent of any money recovered by the IRS, provided the whistleblower is not involved in the fraud or the scheme is not otherwise public knowledge. There are generally two types of awards available under TRHA:
If a single taxpayer’s liability is in excess of $2 million, the IRS will pay between 15 and 30 percent of the amount recovered. For individual (non-corporate) taxpayers, this provision is only valid if the taxpayer’s annual gross income is at least $200,000;
If a single taxpayer’s liability is less than $2 million or an individual taxpayer with $2 million or more in liability does not reach the income threshold, the IRS may award a maximum whistleblower award of 15 percent not to exceed $10 million. This award is solely in the discretion of the IRS.
The IRS does not generally accept whistleblower information unless the informant can present specific, detailed facts tending to suggest the taxpayer is evading or underreporting income. Solid evidence could include cashed checks, information regarding hidden bank accounts, internal audits or recorded audio or video tapes.
If enough evidence exists to submit a claim, the IRS requests all whistleblowers to fill out Form 211 – also known as an Application for Original Information. Once submitted, the IRScan only provide information as to whether the case is open or closed. If the case is closed and you are to receive an award, the IRS will contact you with this information as well. If the case is closed without an award, it is generally due to any of the following reasons:
The IRS already had the information from another source;
There was no finding of liability after an audit or investigation was performed;
The IRS found the taxpayer liable but the taxpayer prevailed in an administrative or judicial action, or;
A finding of liability was made and sustained, but the taxpayer did not have sufficient resources to pay the fines and penalties.
If you receive an award but are unsatisfied with the amount, you can appeal your award to the federal Tax Court.
Always Pay Careful Attention to the Fine Print
Tax avoiders and evaders are master at disguise. They are able to carefully and meticulously avoid paying their tax due by altering books and amending receipts. If you believe tax fraud is happening at your place of employment, the IRS requires detailed and thorough evidence to support your claim. If you need help in determining how to go about uncovering evidence leading to tax fraud, a whistleblower attorney can help you with your case.