Anyone who has obtained evidence that a person or company is committing tax fraud or evasion can become a whistleblower by reporting it to the Internal Revenue Service (IRS). Due to the volume of reports that the agency receives and how important they are for enforcing U.S. tax law, the IRS has a very structured intake system for whistleblowers.

This article provides some of the most important information that potential tax whistleblowers need in order to make informed decisions moving forward.

How to Submit a Claim as an IRS/Tax Whistleblower

As an agency that gets a lot of whistleblower claims, the IRS has created a streamlined system for taking them in. Whistleblowers are to fill out IRS Form 211 and include:

• A description of the tax violations
• Supporting information, such as financial statements or bank records
• A description of additional information that the whistleblower does not have in their possession but that might support their claim, and where that information is located
• An explanation of how the whistleblower became aware of the incriminating information
• A description of the whistleblower’s relationship to the target of the claim
• The whistleblower’s signature and attestation that the information is correct to the best of his or her knowledge

Form 211 must be mailed, together with supporting documentation, to the IRS’ office in Ogden, Utah.

Importantly, though, submitting IRS Form 211 is only the culmination of a long and thorough investigation.

Your Claim to the IRS Needs to Be as Strong as Possible

Filing IRS Form 211 should only be done once you and your whistleblower lawyer think that there is little more than can be added to the case without significant risk of exposing yourself as a whistleblower. Simply put, the stronger your case is, the better.

The good news is that many allegations of tax fraud or evasion are fairly straightforward. Furthermore, these cases are “document heavy,” with most of the evidence printed on physical paper or in computer files.

As Dr. Nick Oberheiden, founding partner of the IRS/tax whistleblower law firm Oberheiden P.C., tells prospective clients, “Sufficient evidence to support a tax fraud case may be found in only a few documents. However, that does not necessarily mean that whistleblowers can stop once those have been found. More thorough investigations often turn up other documents that show that the fraudster is also falsifying documents to cover up their tax evasion. Including this additional evidence can bolster your case and may lead to a bigger whistleblower award.”

Whistleblower Awards are Available

To incentivize whistleblowers coming forward with evidence about tax evasion or fraud, the IRS hands out whistleblower awards to people who have proffered information that the IRS could act upon.

The amount of the award will depend on the nature of the information that the whistleblower provided, as well as on the amount that the IRS is able to recover.

According to 26 U.S.C. § 7623(b), whistleblowers who provide information that is specific, credible, and not available to the public can recover between 15 and 30 percent of the proceeds of the case. If the information is available to the public, whistleblowers who bring it to the attention of the IRS can still recover up to 10 percent of the proceeds of the case if the case is based principally on the whistleblower’s disclosures.

The award can be further reduced if the IRS determines that the whistleblower is also the person who was ultimately responsible for the tax evasion.

Importantly, subsection (c) of the statute defines what the “proceeds” of the case are. They include all of the following that are related to the tax violations that the whistleblower has disclosed:

• Criminal fines
• Civil forfeitures
• Penalties
• Interest
• Additions to tax

As a result, even if the whistleblower is only awarded a small percentage of the proceeds of the case, that amount can still be substantial.

Not Everyone is Eligible for a Whistleblower Award

While anyone can report tax fraud to the IRS, the IRS has an eligibility requirement for the awards that whistleblowers can receive. These eligibility requirements exclude certain people, often precisely because their job puts them in contact with sensitive tax information that may indicate fraud. Those who cannot recover an award for disclosing incriminating evidence to the IRS are:

• Department of Treasury employees, or former employees who obtained the information while working for the Department
• Federal employees who obtain the information while in the scope of their official duties
• Anyone who is either legally required to disclose the information or is prohibited from doing so
• Anyone who got the information, or their access to it, through a contract with the federal government
• Anyone who got the incriminating information from someone who would have been ineligible for an award

Were these people able to collect a whistleblower award, they would be able to unfairly collect many of them.

The IRS’ Whistleblower Statute Protects You from Retaliation

One of the most important things that is likely to be on your mind after finding evidence of tax fraud or evasion is whether you can report it to the authorities and still keep your job. Knowing the reality that workplace retaliation, up to and including termination, is very possible, the IRS’ whistleblower law includes an anti-retaliation provision that forbids your employer’s reprisals for your legal whistleblowing activities. Those reprisals include:

• Termination
• Demotion
• Suspension
• Harassment
• Any other workplace discrimination
• Threats of any of the above types of retaliation

If your employer does any of these things and it is connected to your status as an IRS whistleblower, you can file a complaint with the Secretary of Labor within 180 days and potentially file a lawsuit for wrongful termination or workplace retaliation. Either of these actions can lead to:

• Reinstatement to your old job and seniority status
• Double the amount of back pay that you are owed
• All lost benefits, with interest
• Compensation for all of your other losses or expenses related to filing the retaliation claim, including attorneys’ fees and court costs

Even though these retaliation claims are costly to employers, retaliation is still not uncommon for whistleblowers to face. This is why it is so important to hire a whistleblower law firm that can also represent you if you are retaliated against for blowing the whistle on tax fraud.