The federal tax fraud whistleblower law covers both intentional and unintentional underpayment of taxes. Accordingly, if you have information that a company of individual has either committed tax fraud, or has simply failed to pay the legally-owed amount of taxes, you may be able to bring a claim for a reward.
If you have information concerning underpayment of federal taxes, the claim must be filed with the IRS Whistleblower Office, pursuant to procedures established by that office. At a minimum, you must file an IRS Form 211, Application for Award of Original Information. To make your claim stronger, however, you may wish to consult with a whistleblower attorney, and have the attorney prepare a more extensive filing that includes your evidence, and an explanation of the tax issues.
When you file a claim for a reward with the IRS Whistleblower Office, the IRS will keep your identity confidential to the fullest extent allowable under the law. In most cases, this means that your identity will not be made public, or provided to the target of the investigation. In rare cases, your claim could result in a civil or criminal lawsuit. If that happens, the IRS does have the right to call you to testify as a witness, at which point your identity would become known to the defendant. So, although the great majority of IRS whistleblowers will remain anonymous, that anonymity is not 100% guaranteed.
Under the federal tax fraud whistleblower law, if the amount of taxes, penalties and interests owed by the taxpayer exceeds $2 million (and a few other conditions are met), then a tax fraud whistleblower would be legally entitled to an award of at least 15%, up to a maximum of 30%. If the amount at issue was $2 million or less, then the maximum award would be 15%, and would be discretionary with the IRS.
Tax fraud whistleblower cases can take many attorney hours to prepare and pursue. If you had to pay the attorneys on an hourly basis, the fees would become prohibitive to most potential whistleblowers. But many attorneys who handle whistleblower cases, such as the whistleblower lawyers at Tycko & Zavareei LLP, are willing to do so for a “contingency fee.” This means that the attorneys do not charge by the hour for their time. Instead, they agree to accept a percentage of your recovery as their fee, and they take on the risk that, if you do not obtain any recovery, they will not be paid. Different qui tam attorneys may be willing to offer different terms. If you are seriously considering a tax whistleblower case, you may wish to contact a number of different qui tam law firms, and find one that you believe will do excellent work and that will offer you favorable contingency-fee terms.
No. Finding a tax whistleblower attorney that you believe will effectively and aggressively represent your interests is much more important than finding one that is local. Attorneys who handle tax fraud whistleblower cases routinely work on cases around the country, and not just in the city or state where they have offices. And all tax whistleblower cases are filed with the IRS Whistleblower Office,, located in Washington, D.C. Accordingly, in searching for representation, you should not necessarily limit yourself to attorneys who happen to have offices close to where you work or live. The whistleblower lawyers at Tycko & Zavareei LLP routinely represent whistleblowers in cases throughout the United States. For more on how to choose an attorney to represent you in a securities or commodities fraud case, see our page on Selecting An Attorney.
The IRS whistleblower process is quite slow. The IRS does not pay an award until it has investigated the claim, assessed the taxes owed by the taxpayer, and then actually collected money from the taxpayer. This process can take many years.
The federal False Claims Act contains a specific exclusion for taxes owed to the federal government. Accordingly, the only way to obtain a reward for blowing the whistle on federal tax fraud is to file a claim with the IRS Whistleblower Office. However, a growing number of states—currently including New York, Illinois, and Washington, D.C.—do permit private parties to bring lawsuits under state false claims laws to recover state taxes. Accordingly, if you have information that a company or individual owes state taxes, you should consult with any attorney to determine whether those taxes can be pursued in a qui tam case.