Information Regarding Tax Evasion Can Lead to Handsome Rewards

March 01, 2011 (Press-News.org) The federal government is firmly committed to ensuring that each person pays the taxes he or she owes, but the IRS is not always in the best position to monitor individual compliance. Certainly, the IRS seeks to keep track of those who owe taxes, but the agency also relies on the assistance of individuals who are willing to report on those who fail to pay their taxes.

The IRS offers strong incentives for whistleblowers to encourage those with knowledge of tax evasion to come forward. In exchange for providing specific and credible information that leads to the collection of unpaid taxes, those reporting this information can receive significant monetary rewards.

If, based upon the information provided, the IRS is able to collect more than $2 million in taxes, penalties and interest, the whistleblower is generally entitled to 15-30 percent of the full amount collected. When reporting on individual taxpayers (as opposed to businesses), the individual with unpaid taxes must have a gross income above $200,000 for any year under review. There is no upper limit to the amount an informant can receive.

For information that does not meet these criteria but still leads to the collection of unpaid taxes, whistleblowers may still be entitled to significant compensation. In such situations, the informant may receive up to 15 percent of the amount collected, with a maximum award of $10 million.

After submitting information, an individual must generally file an Application for Award for Original Information, also known as Form 211, with the Whistleblower Office. This can be a lengthy process, and the IRS makes no guarantees regarding timing of a decision.

Although rewarding whistleblowers is not discretionary, the IRS may deny a claim in certain situations. For example, if the Whistleblower Office determines that the whistleblower "planned and initiated the actions that led to the underpayment of taxes," then the reward can be reduced. However, this decision is subject to appeal by federal tax court.

Tax whistleblowers serve and protect the interests of the public. If you have information regarding the underpayment of taxes, do not hesitate to contact the IRS. When providing this valuable information, though, you should also ensure that you receive the full award for your efforts. If you have encountered troubles when seeking an award for serving as a whistleblower, speak with a knowledgeable attorney.

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