The IRS receives confidential information daily from what we in the profession call “The X Factor” – ex-spouses, ex-employees, ex-friends. These are people with whom you may have confided your tax shenanigans, who are sore, and turn you in to the IRS. Those who are bold enough to attach their names to the complaint may receive a reward if the IRS is able to collect taxes based on the information disclosed.
The IRS may award whistleblowers as provided in Internal Revenue Code section 7623(b). To qualify for the section 7623(b) award program, the information provided must be:
- Signed and submitted under penalties of perjury.
- Related to an action in which the tax, penalties, interest, additions to tax, and additional amounts in dispute exceed $2,000,000; and
- Related to a taxpayer, and for individual taxpayers only, one whose gross income exceeds $200,000 for at least one of the tax years in question.
In 2016 the IRS issued awards to 418 whistleblowers, up from 99 awards in 2015. The total amount issued in 2016 was more than $61 million.
Currently, it can take five to seven years for a whistleblower to receive an award for disclosing important information to the IRS, however, the Whistleblower Office continues to streamline its claims evaluation process. In FY 2016, the IRS received 13,396 new claims and closed out 21,124 claims, most of which had been submitted in the past two years. The number of open claims dropped 16% from 2015 to 2016. IRS Publication 5251, The Whistleblower Claim Process, provides more information on this topic.
To read the Whistleblower Office’s full FY 2016 Annual Report to Congress, click here.