Tax Claims Under $2 Million

Tax Claims Under $2 Million

The IRS’s former Form 211 Reward Program allowed individuals to claim a reward after providing information about underpayments of tax to the United States government.  The reward was paid from amounts collected (other than interest) from the subject taxpayer, but payment was discretionary on the part of the IRS and awards were capped at $10 million.  The new whistleblower program, which also uses the Form 211, distinguishes between claimants reporting tax schemes involving more than $2 million and claimants reporting schemes involving lesser amounts.  In general, the new law gives whistleblowers in larger dollars cases the ability to collect higher rewards and enforce their right to collect those rewards.  The following guidance remains true for claims involving less than $2 million, per 26 U.S.C. 7623(a).

 

·         Who May Seek a Form 211 Reward?

·         Amount of Form 211 Reward

·         Payment Discretionary

·         Protection for Whistleblowers

·         Confidentiality of Taxpayer Information

·         Timing

 

Who May Seek a Form 211 Reward?

 

You may be eligible to submit a Form 211 claim for a reward, unless:

 

(a)                   You were employed by the Department of the Treasury at the time you received or provided the Information; or

 

(b)                You are a present or former federal employee who received the information in the course of your official duties.

 

If the whistleblower is deceased, an executor, administrator, or other legal representative may still file a claim for reward on behalf of the decedent so long as the decedent was eligible to file a claim before their death.

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Amount of Form 211 Reward

 

Rewards range from 1% to 15% of amounts collected (including taxes, fines, and penalties, but not interest) up to a maximum of $10 million.  The IRS will typically pay claims for reward based on its assessment of the value of the information furnished voluntarily by the whistleblower on his or her own initiative with respect to the taxes, fines, and penalties recovered.  Factors considered by the IRS include the following:

 

(a)                For specific and responsible information that caused the investigation or, in cases already under audit, materially assisted in the development of an issue or issues and resulted in the recovery, or was a direct factor in the recovery, the reward shall be 15 percent of the amounts the Service recovers, with the total reward not exceeding $10 million.

 

(b)        For information that caused the investigation or, in cases already under audit, caused an investigation of an issue or issues, and was of value in the determination of tax liabilities although not specific, the reward shall be 10 percent of the amounts the Service recovers, with the total reward not exceeding $10 million.

 

(c)        For general information that caused the investigation or investigation of an issue or issues, but had no direct relationship to the determination of tax liabilities, the reward shall be 1 percent of the amounts the Service recovers, with the total reward not exceeding $10 million.

 

(d)               The IRS does not pay a reward if the recovery is so small as to call for a payment of less than $100.00 under the above formulas.

 

(e)        The IRS does not preclude an informant who has received direct payment(s) for information, from filing a claim for reward for the same information.  However, to prevent duplicate payments, the IRS will reduce the amount of any reward payment by the amount of the direct payment(s).

                               

(f)         A Form 211 reward is subject to repayment, in whole or part, if the collection on which it is based is subsequently reduced.

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Payment is Discretionary

 

While the IRS states that it “will pay claims for reward” under specified circumstances, court decisions interpreting the statutes governing the Form 211 reward program have generally held that the payment of rewards is within the government’s discretion and cannot be compelled by persons providing information to the IRS.

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Protection for Whistleblowers

 

The IRS has given formal assurances that it will not disclose the identity of whistleblowers to unauthorized persons.

 

If you have already provided information to the IRS under an identity other than your true name, you may still potentially claim a reward by providing proof during the claims process that you are the person who provided the subject information.

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Confidentiality of Taxpayer Information

 

The IRS is prohibited by law from providing information to the whistleblower regarding specific actions taken by the Service with respect to the information provided by the whistleblower.

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Timing

 

If the IRS conducts an investigation based on the information provided by the whistleblower, it may take two or more years before the investigation is concluded.

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Source:  Internal Revenue Service Publications