On February 13, 2013, the IRS issued its “Fiscal Year 2012 Report to the Congress on the Use of Section 7623,” as required by The Tax Relief and Health Care Act of 2006 (Act). The Act was established “to encourage people with knowledge of significant tax noncompliance to provide that information to the IRS.”
The IRS is generally required to “pay awards if information an individual provides substantially contributes to the collection of tax, penalties, interest, and other amounts when the amounts in dispute are more than $2,000,000.” The percentage awarded depends on the proceeds actually collected. Whistleblowers may also qualify for awards for information regarding significant tax non-compliance for “taxpayer[s] whose gross income exceeds $200,000 for at least one of the tax years in question.”
In FY 2012, the IRS received 332 whistleblower submissions and established 671 prima facie cases, i.e., cases that appeared to meet the $2,000,000 threshold for significant acts of tax non-compliance. Though an increase from the 314 submissions that the IRS received in 2011, the number of claims in FY 2012 falls well below the 2009 high of 472 submissions. Further, the IRS issued a record $125.4M in awards in FY 2012 to whistleblowers who provided evidence of tax non-compliance. In addition, the program resulted in $592.5M in unpaid taxes and penalties–a substantial increase from the $48M collected in 2011.
Query whether the IRS can maintain this level of collections. But the figures the IRS posted should lead employers to anticipate increased whistleblower actions.