The Tax Fraud Blog – Qui Tam Attorneys

Three years ago, the Internal Revenue Service established an office that would allow whistleblowers to report information on big tax fraud scams and receive rewards. For the first time, it appears as if the IRS is paying out a substantial reward.

The Wall Street Journal reports that the IRS Office paid $5.5 Million in reward money to a whistleblower who reported tax fraud among several companies. More money is still possible as the IRS continues to investigate and resolve claims involving the accused companies.

The case began nearly eight years ago and involved international stock and tax fraud scenarios, completed in part by an international corporate conglomerate. It is reported that the case recovered over $60 million in unpaid taxes so far.

This award is the first major IRS payout to a whistle blower, but gives future whistleblowers and their attorneys confidence that the relatively new program is working, according to Dean A. Zerb, a former fraud investigator and key player in creating the new IRS office.

Tough economic times may lead to more tax fraud schemes. That is good news for tax fraud whistleblowers seeking to reap substantial rewards from a law enacted by Congress in 2006. This law requires the IRS Whistleblower Office to pay rewards to individuals who blow the whistle on persons who fail to pay the taxes that they owe the Government. The rewards range from 15% to 30% of the taxes, penalties, and interests collected by the IRS in the case. However, certain conditions must be met first. For example, the whistleblower only receives this monetary reward if more than $2 million is at issue in the case and the IRS actually uses the information provided by the whistleblower.

The process begins with the whistleblower filling out a Form 211, “Application for Award for Original Information,” describing the tax fraud that he or she knows about and attaching documents to support the allegations. All whistleblower claims must be submitted under penalty of perjury; therefore, individuals often seek the assistance of an attorney.

Concerns about retaliation for “snitching” are alleviated by the provisions of this law because the whistleblower’s identity, and even his or her existence, remains a secret and kept out of the public forever. This is quite different than in a qui tam case where the whistleblower’s identity is eventually revealed.

Once the form is submitted, the IRS evaluates the case and decides whether it is worth pursuing. The IRS keeps a tax fraud whistleblower in the dark about the progress of the case until it is closed, which could take years. Even after waiting for the IRS to successfully prosecute the individual who committed the tax fraud, whistleblowers should not expect to see their reward immediately because the IRS does not pay out the reward until the accused has exhausted his appeals and paid the owed taxes.