Tax Law and the IRS Whistleblowing Program: Frequently Asked Questions

There are many legitimate ways to take advantage of the tax code to save money and lower your taxes. However, there is a fine line between saving money and not paying what you owe. At some point, underpayment of taxes constitutes tax fraud and creates an unfair burden on other taxpayers and violates both federal and state tax laws. Though the Internal Revenue Service has its own audit procedures to make sure that every individual and every business pays their fair share of taxes, it is often up to whistleblowers to alert the IRS to some abuses that might not otherwise be discovered for years.

If you have observed tax underpayment that you believe amounts to fraud, you should strongly consider reporting your findings to the appropriate authorities, typically by filing a report with the IRS. How and why you should do this can be a complicated question and is one that is best answered by a competent and experienced whistleblower attorney specializing in tax reporting. Here, however, are a few frequently asked questions to get you started:

  • Why should I consider blowing the whistle? Without getting into a conversation about ethics, it can be a financially prudent decision for people who observe tax fraud to report it. The IRS Whistleblower Program offers whistleblowers monetary compensation in the event that their report leads to the investigation or discovery of tax fraud.
  • What is the IRS Whistleblower Program? The IRS Whistleblower Program is a federal law that gives whistleblowers the opportunity to recover 15-30% of the amount the IRS receives if a whistleblower’s tip leads to recovery of back taxes. 
  • Do I qualify for the IRS Whistleblower Program? There are some caveats to the offerings of the IRS Whistleblower Program. First, the debt owned by the person or entity must exceed a large sum, currently $2,000,000. Second, if it is an individual person who owes the back taxes, he or she must have earned at least $200,000 in one of the years for which he or she owes back taxes. Essentially, if you report leads to the discovery of a relatively small amount of tax debt, you may be out of luck.
  • What if I was involved in the tax fraud? You may still be able to recover under the IRS Whistleblower Program, even if you were involved in the fraud. To recover, you must not have been involved in planning or initiating the underpayment constituting fraud and you also must not be or have been convicted for tax evasion or fraud related to the underpayment.

These questions and answers only address the most basic issues regarding the intersection of tax law and whistleblowing. If you believe that you have information that could lead to the discovery of underpayment constituting tax fraud, consider contacting a qualified and experienced lawyer, like a whistleblower retaliation claims lawyer in Washington DC from Eric Siegel Law, who can help you evaluate your options so that you can protect yourself and make sure that you get any compensation for your efforts to which you are entitled.