Awards Under the IRS Whistleblower Program

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 IRS 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.

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.

If you have information concerning tax fraud and want to know your rights as an IRS whistleblower, the attorneys at Bernstein Liebhard can help.  Our attorneys will help you navigate the IRS Whistleblower Program to ensure that you comply with the program’s requirements.  Contact Michael S. Bigin or Laurence J. Hasson for more information.