The IRS paid out a record amount last year in financial awards to tipsters who told the agency about others’ failure to pay taxes.
If you are concerned about your organization’s noncompliant tax behavior, however, the path to pursuing an award for informing the IRS is not an easy one. It is generally best done with guidance from a specialized tax attorney who can help you prepare your submission, not by trying to do it yourself (DIY).
What kind of information is typically needed for a successful submission?
Before answering that question, let’s take note of the sharp increase in financial awards. In Fiscal Year 2018, the IRS paid out a record $312 million in awards to whistleblowers whose tips about unpaid taxes brought in revenue to the agency. This amount was more than double the previous record, which was $125 million in 2012.
Most of the growth is from the large-awards section of the program, which applies to cases in which there was more than $2 million in unpaid tax. Tipsters who meet specified criteria can get up to 30 percent of the amount that the IRS collects in those cases. In FY 2018, $300 million of the $312 million paid out was in these large-program cases.
But the process of successfully submitting information that leads to an award requires careful preparation. This often includes gathering information that includes:
• Internal memoranda
• Account statements
It may also require voice recordings — voice recordings, as in wearing a wire.
Many would-be whistleblowers hire a specialized tax attorney to help them prepare a successful submission to the IRS. The agency naturally prefers cases that are handed to it on the proverbial silver platter.
This does not mean, however, that IRS whistleblowers have to be perfect. For example, the largest known recipient of a financial award, Bradley Birkenfeld, was convicted of tax evasion for conspiring to assist a taxpayer hide money in offshore accounts with the Swiss bank UBS.