The IRS Whistleblower Program was enacted as a part of the Tax Relief and Health Care Act of 2006. This act established the IRS Whistleblower Office that works with individuals who provide tips that lead to the discovery of IRS tax code violations. If you are interested in learning about how the IRS Whistleblower Program works, bring your questions to an experienced dually licensed California Criminal Tax Defense Attorney and CPA. The Tax Law Offices of David W. Klasing have extensive knowledge of how the IRS Whistleblower Program works, and we are here to explain how it is used to combat tax fraud and actions you should take if you feel you are at risk of being the subject of one.
Note: As long as a taxpayer that has willfully committed tax crimes (potentially including non-filed foreign information returns coupled with affirmative evasion of U.S. income tax on offshore income) self-reports the tax fraud (including a pattern of non-filed returns) through a domestic or offshore voluntary disclosurebefore the IRS has started an audit or criminal tax investigation / prosecution, the taxpayer can ordinarily be successfully brought back into tax compliance and receive a nearly guaranteed pass on criminal tax prosecution and simultaneously often receive a break on the civil penalties that would otherwise apply.
It is imperative that you hire an experienced and reputable criminal tax defense attorney to take you through the voluntary disclosure process. Only an Attorney has the Attorney Client Privilege and Work Product Privileges that will prevent the very professional that you hire from being potentially being forced to become a witness against you, especially where they prepared the returns that need to be amended, in a subsequent criminal tax audit, investigation or prosecution.
Moreover, only an Attorney can enter you into a voluntary disclosure without engaging in the unauthorized practice of law (a crime in itself). Only an Attorney trained in Criminal Tax Defense fully understands the risks and rewards involved in voluntary disclosures and how to protect you if you do not qualify for a voluntary disclosure.
As uniquely qualified and extensively experienced Criminal Tax Defense Tax Attorneys, KovelCPAs and EAs, our firm provides a one stop shop to efficiently achieve the optimal and predictable results that simultaneously protect your liberty and your net worth. See our Testimonials to see what our clients have to say about us!
How the IRS Whistleblower Program Handles Tax Fraud
The IRS Whistleblower Program is a major deterrent for taxpayers who believe they could openly commit tax fraud and get away with it. As mentioned, the IRS Whistleblower Office accepts tips that would aid them in uncovering incidents of tax fraud. In return for their information, the whistleblower would receive a substantial reward from the IRS. However, there are some stipulations that a whistleblower must follow if they wish to recover a reward for their information.
One of the most important factors to note about tax whistleblowing is that the IRS is not interested in every instance of tax fraud. Instead, the IRS wants information about taxpayers who have committed tax code violations that amount to at least $2 million in tax debt, which also includes penalties and interest assessed by the IRS. As a result, the majority of whistleblower cases involve large corporations or high-wealth individuals that commit tax fraud.
There are a variety of tax fraud issues that may be addressed with the IRS Whistleblower Program:
- Altering records to change when revenue is recognized
- Circular transactions where the money is transferred between entities for tax benefits
- Cryptocurrency tax fraud
- Employment tax fraud
- The exploitation of tax shelters
- Falsely claiming tax-exempt status
- Illegally claiming tax credits (e.g., renewable energy deductions)
- Underreporting of income
- Claiming of false tax deductions
- Falsely claiming tax credits
- Falsely describing illegal source income as legal source income
These are just a few ways that a person or company may commit tax fraud and find itself as a target of a whistleblower complaint.
Reporting Tax Fraud Under the IRS Whistleblower Program
The IRS Whistleblower Office only handles whistleblower cases, which should tell a taxpayer how serious the agency is when it comes to the evasion or underpayment of taxes. Of course, this does not mean that all reports of tax fraud will be investigated. The Whistleblower Program is not intended to be used as an avenue to seek vengeance on a corporation or to handle personal disputes. It is also important to have clean hands yourself when making one. You’re very likely to get in trouble yourself if you helped perpetuate the fraud in any way.
When blowing the whistle on a person or business committing tax fraud, the whistleblower must use IRS Form 211. When submitting information to the IRS, the whistleblower cannot support their claim with a mere educated guess. The IRS Whistleblower Office is looking for tips that are supported by substantial information. For example, if a whistleblower is alleging that a company is underreporting their income, they may require documentation that shows discrepancies in their income reporting history. For this reason, a whistleblower should consider retaining a California whistleblower attorney to help gather evidence to support their claim. This could make it easier to link their evidence to tax code regulations that were violated by the individual or business that committed tax fraud, which would make it more likely for a whistleblower to be rewarded.
There are some instances where the IRS Whistleblower Office will not process a claim:
- The whistleblower is an employee of the U.S. Department of Treasury or another local, state, or government agency.
- The whistleblower is legally required to disclose tax fraud violations.
- The whistleblower submitted the tip anonymously.
- Claims that are filed by a corporation or partnership.
- The non-compliant taxpayer in question has a gross income below $200,000.
This is not an exhaustive list. The IRS could reject a whistleblower claim under other circumstances.
After the submission of Form 211, the IRS will examine the evidence presented by the whistleblower to determine whether it is sufficient to support an audit or enough for the case to be referred to the U.S. Department of Justice.
Reward for Whistleblowing
Note that filing a Form 211 does not mean that the whistleblower will be involved in all aspects of the case. The IRS will likely interview the whistleblower once and will later inform them when the case has concluded and the amount of money for which the case was settled.
If a whistleblower claim is successful, the whistleblower will receive a reward between 15-30% of the taxes recovered from the target of the complaint. This could be a significant windfall for a whistleblower and provides a great incentive for a person to come forward with information against a non-compliant taxpayer. This means that taxpayers who engage in open tax fraud should beware that they could be the subject of a whistleblower case if they do not handle their tax debt legally and appropriately.
Call Our IRS Whistleblower Program Attorneys If You are Accused of Tax Fraud
If you wish to know more about the IRS Whistleblower Program, you should call our California Tax Lawyers today. The legal team at the Tax Law Offices of David W. Klasing has years of experience helping our clients navigate complex tax law issues. We know that facing tax fraud allegations especially where the IRS Whistleblower Program has been alerted is incredibly stressful, and we would like to offer our expertise to guide you through the process. To arrange a confidential consultation with a member of our legal team, call us at (800) 681-1295. You could also gain more information about consultation options on our website.
Questions and Answers for Criminal Tax Representation
- When tax defense counsel parallels tax crime investigation
- Guilty of tax obstruction by backdating documents?
- To be found guilty of tax obstruction must a person actually be successful in impeding the IRS’s functions?
- Help! The Document I Gave the IRS Had False Information
- Tax crime aiding or assisting false return IRC §7206(2)
- What is the crime known as tax obstruction § 7212?
- What is the difference between tax perjury and tax evasion?
- What is the tax crime commonly known as tax perjury?
- What is a Klein Conspiracy?
- Increased possibility of civil action in IRS investigation
- Am I Guilty of Tax Evasion if the Law is Vague?
- What happens if the IRS thinks I committed tax crimes?
- What are ways to defend against a tax evasion charge?
- Difference between criminal tax evasion and civil tax fraud
- What accounting method does the IRS use for tax fraud
- Can I Change Accounting Method to the Accrual Method
- What is the willfulness requirement for tax evasion?
- I didn’t know I committed tax fraud. Can I get off?
- Concealed assets from IRS. Can I avoid tax evasion charges
- How government proves I willfully engaged in tax evasion
- What is the venue or court where a tax crime case is heard?
- Must the IRS prove tax crimes beyond a reasonable doubt?
- Is it a crime to make false statements to the IRS?
- Will the IRS overlook my tax evasion if it’s minor?
- Failed to tell IRS about my nominee account
- Audit risk with cash based business transactions
- How to defend a client charged with tax evasion
- Is it tax evasion if I didn’t file income tax return?
- Government says I attempted to evade my taxes. Now what?
- I forgot to pay my taxes or estimated tax. Is this a crime?
- Government proof I “willfully” failed to pay taxes
- 5 Ways to Respond to Tax Evasion Charges
- Being audited after using a tax professional
- Rules for what an IRS agent can do while investigating me
- How tax preparers, attorneys and accountants are punished
- How the IRS selects tax crime lead for investigation
- How does the IRS prosecute suspected tax crimes?
- Does IRS reward informant leads for suspected tax crimes?
- How the government proves deficiency in a tax evasion case
- Do prior tax crimes factor into new IRS tax convictions?
- Requesting conference before investigative report is done
- Requesting conference after IRS Special Agent Report
- What are my rights during an IRS criminal investigation?
- Avoid prosecution for tax crime with voluntary disclosure?
- Defense tactics that make it hard for to prove willfulness
- How a tax attorney can stop your criminal tax case?
- What can you generally tell me about tax crimes?
- Continuing filing requirement with investigation pending
- Federal criminal code crimes that apply to tax issues
- Penalty for making, subscribing, and filing a false return
- CID special agent’s report for criminal prosecution
- What is the discovery process in a criminal tax case?
- What the IRS includes in indictment for tax case
- What is the hardest element of a tax crime to prove?
- IRS methods of gathering evidence to prove tax crime
- What does a grand jury do in IRS tax crime prosecution?
- Failure to keep records or supply information
- Failure to make a return, supply information, or pay tax
- What is attempting to evade payment of taxes?
- What is income tax evasion and how is it punished?
- What is attempted income tax evasion?
- What is the crime of failure to pay tax? What is punishment
- Crime of making or subscribing false return or document
- Criminal Investigation Division investigation tactics
- Tax crimes related to employment tax forms and trust funds
- Tactics to defend or mitigate IRS criminal tax charges
- How the IRS generates leads about suspected tax crimes
- What is the crime ”evasion of assessment” of tax?
- Specific examples of “attempting” to evade tax assessment
- What is the so-called Spies evasion doctrine?
- Does overstating deductions constitute tax evasion?
- Is it tax evasion if my W-4 contains false statements?
- IRC §7201 attempt to evade vs. common-law crime of attempt
- What are the penalties for Spies tax evasion?
- How government proves a taxpayer attempted tax fraud
- What is a tax that was “due and owing.”
- What is evasion of assessment for tax liability?
- Is evasion of assessment different from evasion of payment
- Does the IRS have a dollar threshold for tax fraud?
- What is the IRS burden of proof for tax fraud convictions?
- Are Tax Laws Constitutional?
- What is the source of law that defines tax evasion?
- Does section 7201 create two distinct criminal offenses?
- Does tax evasion definition include partnership LLC
- What if I helped someone else evade taxes?
- Is it illegal to overstate deductions on my tax return?
- Is it illegal to conceal bank accounts from the IRS?
- Do later losses justify prior deductions?
- Common reasons the IRS and DOJ start investigations
- What is the Mens Rea component of tax crimes?
- What is a proffer agreement and what are the risks?
- Why to have an attorney to review a proffer agreement
- Why enter into a proffer agreement?
- Limited use immunity from proffer agreements
- Difference between civil and criminal fraud alle
