IRS Whistleblower Program

What is the IRS whistleblowers program?

The IRS whistleblower program provides rewards and protections to individuals who report to the IRS detailed information about significant tax fraud or other tax violations by their employers or others. The program is administered by the IRS Whistleblower Office.

The Tax Relief and Health Care Act, passed by Congress in 2006, created the expanded IRS whistleblower program and its core provisions. Additional, powerful protections for IRS whistleblowers were added with the enactment of the bipartisan Taxpayer First Act of 2019.

Can IRS whistleblowers receive rewards?

IRS whistleblower rewards can range from 15% to 30% of the amount the IRS collects as a result of information provided by tax whistleblowers.

To qualify for the IRS whistleblower reward, the whistleblowers must provide information about tax fraud or tax underpayments that exceeds $2 million (counting tax, penalties and interest). In addition, if allegations concern an individual, that person’s annual income must exceed $200,000.

If a reward from the IRS fails to sufficiently recognize the whistleblower’s contribution, the whistleblower may appeal the reward amount to the US Tax Court.

If the IRS whistleblower initiated or planned the tax fraud, the IRS may reduce or deny a reward. An IRS whistleblower reward also may be reduced if the whistleblower’s allegations have been previously disclosed.

...If the IRS ever wants to put an end to Wall Street tax shelter schemes, they are going to need the help of Wall Street insiders to get the information and the expertise that it will take.

IRS Whistleblower Process: Step-by-Step Guide

1. Complete Form 211: To be eligible for a whistleblower award, you must fill out IRS Form 211, Application for Award for Original Information, thoroughly and accurately. Provide a detailed narrative of the tax noncompliance and include all supporting documentation.
2. Submit Your Claim: Submit your completed Form 211 to the IRS Whistleblower Office. It can be mailed or submitted electronically through the IRS e-filing system.
3. IRS Review and Investigation: The IRS Whistleblower Office will review your claim and determine whether to refer it to an IRS Operating Division for further investigation. They may contact you for additional information or clarification.
4. IRS Action: If the IRS decides to proceed with an audit or investigation based on your information, they will keep you updated on their progress, although specific details may be confidential.
5. Award Determination: If the IRS collects more than $2 million as a result of your information, and you meet the IRS’s eligibility requirements, you are entitled to an award.  The IRS Whistleblower Office will determine whether you are entitled to an award, as well as the amount of your award.  The award will be between 15% and 30% of the IRS’s recovery, subject to limited exceptions.  If you disagree with the IRS Whistleblower Office’s award determination, you have the right to appeal to the U.S. Tax Court.

Throughout this process, it is highly recommended that you seek legal counsel from an experienced whistleblower attorney. They can help you navigate the complexities of the process, ensure your claim is strong and well-documented, and advocate for your rights as a whistleblower. 

How are IRS whistleblowers protected?

 The IRS whistleblower program ensures strict confidentiality (with certain limitations) for those who come forward.

Due to IRS whistleblower protection, whistleblowers who experience job retaliation – including being fired, demoted, harassed or having their pay cut – may sue for reinstatement, double back pay, attorneys’ fees and compensation for other damages, such as emotional distress and reputational harm.

The law also prohibits the enforcement of arbitration provisions requiring retaliation claims to be arbitrated.

How will the IRS communicate with whistleblowers?

The Taxpayer First Act made important improvements in the IRS whistleblower program by authorizing the IRS to communicate with whistleblowers and their attorneys to request assistance and to notify them at certain times during the processing of their claims.

The IRS Whistleblower Office will automatically notify whistleblowers within 60 days whenever audit referrals or tax payments have been made due to the whistleblower’s information. This may provide greater transparency for whistleblowers and their counsel and help them learn whether they are eligible for an award.

The IRS also now can advise whistleblowers whether their matter is under investigation or is closed. If closed, the IRS can tell whistleblowers whether they will receive a reward or their claims are denied.

Importantly, the IRS still must shield the privacy of the entities and individuals under investigation.

Phillips & Cohen advocates for IRS whistleblowers

Phillips & Cohen has the longest-standing and most successful practice representing whistleblowers in government reward and protection programs, with more than $1.1 billion in whistleblower awards made to Phillips & Cohen clients.

The IRS awarded a Phillips & Cohen whistleblower client $20 million for his help in exposing an abusive tax shelter involving billions of dollars. This is one of the largest publicly announced awards from the IRS whistleblower program. In addition, the IRS awarded the same Phillips & Cohen client two whistleblower awards involving other entities: one for $2 million and another for $1.1 million.

In advocating for a different tax whistleblower client, Phillips & Cohen partner Edward H. Arens won an important victory in US Tax Court, which also will benefit other IRS whistleblowers who challenge IRS award determinations.

Erika A. Kelton, Larry Zoglin, Arens and Emily Stabile of Phillips & Cohen and attorney Andrea Hasegawa co-authored Tax Whistleblower Laws and Programs, which is part of Bloomberg BNA’s Tax Management Portfolios. The portfolios are considered the gold standard in the legal world for those dealing with tax matters.

Phillips & Cohen attorneys also have written many articles on the IRS whistleblower program. To read some of those articles, see the list below.

If you are aware of a tax fraud and would like to consult with a whistleblower attorney to discuss your options, please contact us for a free, confidential review of your case.