IRS announces new whistleblower guidelines

In 2006, Congress overhauled the rules that reward individuals who give the IRS information about tax evasion. The IRS recently posted guidelines for the investigation and processing of "whistleblower claims" on its web site. The guidelines explain when the IRS will pay or deny a whistleblower's claim and reiterate that the whistleblower process is confidential.

Financial awards

There are two types of awards for whistleblowers. If the tax evasion exceeds $2 million, and a few other qualifications are met, the IRS will pay 15 percent to 30 percent of the amount collected. If the tax evasion is by an individual, his or her annual gross income must be more than $200,000. The IRS also has an award program for other whistleblowers - generally those who do not meet the dollar thresholds of $2 million in dispute or cases involving individual taxpayers with gross income of less than $200,000. The awards made through this program are less, with a maximum award of 15 percent up to $10 million. In addition, the awards are discretionary on the part of the IRS. These awards are also handled by the IRS Whistleblower Office.

The IRS explained that it takes all relevant factors, including the value of the information furnished in relation to the facts developed by the investigation of the violation, into account in determining if an award will be paid, and if so, the amount of the award. The guidance describes various scenarios when a whistleblower may receive an award.

Example. Alex identifies specific facts relating to an issue with respect to a taxpayer as well as a specific Tax Code section or specific legal theory associated with those facts. However, the IRS ultimately collects proceeds based on a different Tax Code section or different legal theory. Nevertheless, Alex will be entitled to an award based on the entirety of those collected proceeds.

Denials

The IRS will deny a whistleblower claim if the information does not result in the detection of an underpayment of taxes or the collection of proceeds. Claims are paid from collected proceeds. The IRS explained that this generally means that a payment will not be made until there is a final determination of tax liability (including taxes, penalties, interest, additions to tax, and additional amounts) owed to the IRS and these amounts have been collected by the IRS.

Confidentiality

The IRS has promised to protect the confidentiality of all whistleblowers. In some cases, however, the IRS explained that it may not be possible to pursue the investigation or examination without revealing the whistleblower's identity. The IRS will inform the whistleblower before deciding whether to proceed in such cases.

www.irs.gov