Frequently Asked Questions (FAQs)
What is covered under the IRS tax whistleblower reward program?
Is the IRS tax whistleblower program limited to paying rewards for tax frauds?
No. The largest misconception concerning the IRS whistleblower program is that it only covers tax frauds. The IRS whistleblower law covers a wide range of misconduct, and also includes the non-criminal underpayment of taxes.
Prior to 2018, what violations are covered under the IRS whistleblower law?
The original tax whistleblower law covered tax frauds and the underpayment of taxes. However, there was widespread disagreement as to the scope of the law, and whether or not the law covered criminal tax frauds and/or sanctions paid for IRS-related infractions.
The law firm of Kohn, Kohn and Colapinto, working with the National Whistleblower Center and tax attorney Dean Zerbe led the fight to clarify the tax whistleblower law. In 2017, they won a landmark ruling in Tax Court broadening the scope of the tax whistleblower law. The Department of Treasury appealed this ruling. While the case was under appeal Congress amended the law to include any law or regulation for which a form is filed with the IRS, or is within the jurisdiction of the IRS criminal division.
In 2018 Congress amended the tax whistleblower law to broaden the scope of coverage explicitly. In response to that law, the Department of Treasury dropped their appeal of the Tax Court case.
What violations are now covered as a result of the 2018 amendments to the IRS tax law?
The 2018 amendment to the IRS tax law created an explicit definition to the types of “collected proceeds” for which a whistleblower could obtain a reward. The law clarified the scope of the whistleblower reward provision to include payment for monies collected by the United States for tax frauds, tax underpayments, the violation of any law or regulation within the jurisdiction of the IRS criminal division, or the violation of the requirements set forth in any form that a taxpayer or bank was required to file with the IRS.
According to the plain language of the 2018 amendments, and the legislative history of those amendments, whistleblowers could obtain a reward even if the violation was not directly related to tax, and the violator did not owe any back taxes.
What are the precise terms of the 2018 tax whistleblower law amendment?
The 2018 amendment defines the scope of the tax whistleblower reward provision as follows:
SEC. 41108. CLARIFICATION OF WHISTLEBLOWER AWARDS.
(a) DEFINITION OF PROCEEDS.—
(1) IN GENERAL.—Section 7623 is amended by
adding at the end the following new subsection:
‘‘(c) PROCEEDS.—For purposes of this section, the term ‘proceeds’ includes—
‘‘(1) penalties, interest, additions to tax, and additional amounts provided
under the internal revenue laws, and
‘‘(2) any proceeds arising from laws for which the Internal Revenue Service is
authorized to administer, enforce, or investigate, including—
‘‘(A) criminal fines and civil forfeitures, and
‘‘(B) violations of reporting requirements.’’
Where can I obtain more information about the 2018 amendments to the IRS whistleblower law?
The New Whistleblower’s Handbook contains extensive information on IRS program (See Rule 7: Tax Cheats and the IRS Qui Tam. Get a Reward!). You can also learn more here: Big Win for Tax Whistleblowers.
However, the 2018 amendments were enacted shortly after the Handbook was published.
For a tax-deductible donation of $50.00 or more, you can obtain a copy of the Handbook from the National Whistleblower Center. All proceeds for these sales are donated to the National Whistleblower Center.
Where can I obtain legal assistance in filing Tax whistleblower case?
Please fill out one of the Kohn, Kohn and Colapinto’s consultation request form describing your case.