Three whistleblowers have been awarded $79 million for their help uncovering an offshore tax scheme spanning 15 years that recovered $263.7 million in unpaid taxes, penalties, and interest for the government from an unidentified person. The whistleblowers have chosen to remain anonymous, as allowed by the IRS’s whistleblower program.
The $79 million award is 30% of the recovery, the maximum allowed by the Internal Revenue Service (IRS) and is one of the largest whistleblower awards in the history of the agency’s whistleblower program. The biggest IRS award to date was made to former Group AG banker Bradley Birkenfeld, who received $104 million for telling US investigators how his employer helped thousands of people evade taxes.
Started in 2007, the IRS Whistleblower Office has paid more than $1 billion in over 2,500 awards to whistleblowers since the program’s inception. Information provided by tipsters has led to $6.39 billion collected from non-compliant taxpayers. Whistleblowers can qualify for an award if they provide information about tax fraud or tax underpayments that exceed $2 million (counting tax, penalties, and interest). In addition, if allegations concern an individual, that person’s annual income must exceed $200,000.
The $79 million award is more than all awards paid to IRS whistleblowers in fiscal years 2021 and 2022 combined, and only about $10 million less than the $88.8 million in awards paid to 121 whistleblowers in 2023. The government’s $263.7 million recovery exceeds all amounts collected based on whistleblower tips to the IRS in 2021 or 2022.
The U.S. tax system depends on voluntary compliance, with people paying taxes timely and accurately. Because of the IRS’s voluntary compliance standard, the agency relies on individuals with inside knowledge to play an integral component in enforcement efforts, awarding whistleblowers with inside information 15 to 30 percent of monies collected. However, the IRS whistleblower program has faced scrutiny for its lack of communication with whistleblowers and lengthy process to investigate tips and pay awards to successful whistleblowers, taking 10 years or more in some cases.
The award may be a sign that the IRS Whistleblower Office is gathering momentum. In 2022, the IRS Whistleblower Office gained a new Director, John Hinman, and the office has been prioritizing increasing the speed at which it processes whistleblower awards. In FY 2023, the Whistleblower Office saw the first noticeable increase in whistleblower awards issued since 2018. The IRS and the Whistleblower Office have also benefitted from increased funding from the Inflation Reduction Act, which has resulted in additional hiring and modernization efforts within the agency.
If you have information about possible tax evasion and would like to speak to an experienced whistleblower attorney, contact Phillips & Cohen for a confidential review of your matter.