What You Need to Know When Reporting IRS Tax Fraud
With the passage The Tax Relief and Health Care Act of 2006 in December 2006, people who report tax fraud to the IRS are now eligible for larger cash rewards. Prior to the lawâ€™s passage, the IRS rarely paid tax fraud Whistleblowerâ€™s cash rewards, despite the obvious risk undertaken by Whistleblowers. And even in the rare instances that the IRS did compensate a Whistleblower, such cash rewards were small â€“ between 1% and 15% of the monies recovered. The IRS also had sole discretion in determining how much to reward a tax fraud Whistleblower.
In an effort to encourage people to report violations, Congress passed The Tax Relief and Health Care Act of 2006. Tax fraud costs the federal government millions of dollars every year. Often, abusive tax shelters are used to evade taxes, and such shelters are difficult for outside tax investigators to uncover. It is hoped that the increased rewards offered to Whistleblowers under The Tax Relief and Health Care Act of 2006 will encourage people with information about such practices to report these abuses to the IRS
The basic provisions of The Tax Relief and Health Care Act of 2006 are as follows:
- In order to qualify for a reward, a Whistleblower must provide information on tax fraud or tax underpayments that exceeds $2 million in tax, penalties and interest.
- The annual income of an individual who commits tax fraud must be in excess of $200,000.
- Whistleblowers can receive a reward equal to 15% to 30% of the total monies recovered (including all back taxes, penalties and interest).
- If the IRS refuses to reward a Whistleblower for their contribution to a tax fraud case that results in monies recovered, the individual may appeal the decision to the US Tax Court. The amount of an award may also be appealed to the US Tax Court if it is not commiserate with the Whistleblowerâ€™s contribution to a tax fraud case.
- The amount of reward can be reduced or denied if a Whistleblower initiated or planned the tax fraud, or if the Whistleblowerâ€™s allegations had already been made public.
- The IRS pays rewards once its investigation into the tax fraud is complete, it has collected all monies owed and the case is officially closed.
If you have knowledge of tax fraud that exceeds $2 million and would like assistance in bringing your allegations to the IRS, please contact Parker Waichman LLP at 1-800-LAW-INFO (1-800-529-4636), or fill out the form to the left and you will be contacted by a qualified income tax fraud attorney.