Calculating The Reward
Guaranteed Minimum Reward Of 15%
Under the Tax Relief and Health Care Act of 2006, a whistleblower will receive at least 15% of the proceeds collected and may receive up to 30% of the amounts collected as a result of any administrative or judicial action resulting from the information provided. There is no limit on the dollar amount of the award.
Thus, assuming the IRS takes action based upon information filed by a whistleblower, that whistleblower is automatically entitled to a reward of 15% of the amount collected as a result of any administrative or judicial action. If the IRS collects $20 million in taxes, penalties and interest, for example, then the whistleblower would be entitled to receive the minimum reward of 15% or $3 million.
Additional Discretionary Award Up To 30%
The Whistleblower Office has the discretion to pay more than a 15% reward. The IRS has identified a nonexclusive list of factors in the award procedures outlined in the Internal Revenue Manual that will be considered in determining where the reward will fall on the 15-30% scale. These factors generally relate to the impact the tax whistleblower has on the IRS’s case as a whole, but other factors considered are things such as providing “exceptional cooperation and assistance during the audit, investigation, or trial, including useful technical or legal analysis of the taxpayer’s records.”
A Lesser Reward For Collections Based Upon Public Information
The Tax Whistleblower Rules provide for a smaller reward when information from the whistleblower is based principally on certain public sources, such as a judicial or administrative hearing; a government report; a government audit or investigation; and/or the news media. For these publicly disclosed matters, the law provides for a reward of 0-10% of the amount recovered.
Moreover, if the whistleblower merely makes allegations of an underpayment of tax but does not provide actual information that contributes to the IRS’s efforts to pursue the taxpayer, the reward may fall within the 0-10% range. Furthermore, the IRS may reduce or even eliminate the reward entirely if it determines the allegations made by the whistleblower did not lead to the collection of the tax.
This range does not apply if the whistleblower was the source of the information leading to the hearing, report, audit, investigation or report.
Award Determined As Percentage Of IRS Recovery From The Taxpayer
A tax whistleblower reward is based on a percentage of the proceeds collected from the taxpayer, i.e., the total amounts collected from the action and any related actions or from any settlement in response to the action. The base for calculating the reward is composed of five categories of receipts: taxes, interest, penalties, additions to tax, and additional amounts.
Appealing A Reward
To the extent a tax whistleblower is dissatisfied with the amount or percentage awarded by the IRS, he or she has thirty days to file an appeal with the United States Tax Court. Federal district courts and the Court of Federal Claims do not have jurisdiction to hear whistleblower appeals. The attorneys at Bernstein Liebhard LLP are well equipped to assist you with the appeal of an unsatisfactory reward determination.
If you have information about a person or corporation that committed tax fraud, you could be eligible for a reward of up to 30% of the amount of back taxes, penalties and interest collected by the IRS. The attorneys at Bernstein Liebhard will assist you in filing your claim and work with you to persuade the IRS to pay the maximum reward permitted if your information leads to a recovery. Contact Michael S. Bigin or Laurence J. Hasson to review your claim.