“In this world nothing can be said to be certain, except death and taxes.” In the more than two centuries since Benjamin Franklin expressed those words, taxes have become perhaps even more of a certainty. The Internal Revenue Service (IRS) remains one of the most feared and dreaded organs of the federal government. However, even the IRS has limits when it comes to work force and investigative capabilities. It must rely heavily upon whistleblowers to uncover tax fraud and evasion and it pays significant financial incentives to those who provide information that leads to results.
According to the New York Times, in April of 2014 the IRS released figures stating that it had paid at least $53 million to whistleblowers during 2013 as part of its informant award program. These whistleblowers, who received an average bounty of $435,000, provided information that led to the assessment and collection of more than $367 million in taxes.
The IRS recently made significant changes to its approach to compensating whistleblowers for information that leads to the discovery of tax fraud or evasion. The program is currently subject to the following limitations:
The IRS pays a bounty of between 15 and 30 percent for information that leads to the recovery of $2 million or more. If the delinquent taxpayer is an individual, his or her annual income must be in excess of $200,000.
The IRS also has a program for smaller cases that do not meet the above criteria. Awards in these cases are capped at 15 percent and are wholly discretionary.
In any case, the information provided must be specific and credible and must actually lead to the collection of delinquent taxes. The IRS does not pay a bounty for speculation or innuendo.
Protecting your rights as a tax informant can be complicated. Moreover, as is the case with most whistleblowers, tax informants often face aggressive retaliation from the individuals and companies against whom they provide information.