You Will Need Patience to Get Those Lucrative Commissions As a Successful Tax Whistleblower!
When you blow a whistle for people who cheat IRS, you can get a reward – up to 30 per cent of the tax and penalty collected. But the things are not that straightforward. You should also know the fine print of the offer.
The Tax Relief and Health Care Act of 2006 introduced this program. It says if you come across someone evading taxes to the tune of $2 million or more, you can report information on such tax cheat to IRS. There is one more condition – the income of such cheat should exceed $200,000. It is obvious that someone hiding two million dollars will have an annual income of $200,000!
So IRS is targeting high income growth to make its effort worthwhile. Consequently, people giving such information can be only the employees or former employees of a business or the ex-boyfriends or girlfriends or ex-spouse of the evader.
The law is providing the whistle-blower some privileges – The whistle-blower may not necessarily be an original source. Secondly, if he is not satisfied with the reward, he will have a right to go to a tax court within a period of 30 days from the date IRS decides on the reward.
The amount of reward is also made lucrative – the whistle-blower is entitled to a reward ranging from 15 per cent to 30 per cent of the tax and penalties collected and depending upon his contribution to get the collection. If he is not the ‘original’ source of information, he can still get up to 10 per cent of the amount collected as a contributor towards collection.
With the increase in reward, there is an increase in the expectations of IRS also. You cannot pass on general or guessed information but you will have to provide specific information like the social security number of the cheating person, bank account details, details of assets involved in such evasion process and if possible, copies of the books and records used for accounting. The whistle-blower will have to complete Form 211 – Application for Reward for Original Information. IRS may not ask you how you got the information but you should have some explanation for it.
As the estimated tax gap for crosses $300 billion every year, there is always great scope for the tax whistle-blowers. The reward is certainly lucrative, but it requires a lot of patience. IRS is going to collect all the money it owed from the tax cheater and when the matter is closed, it will release the payment the whistle-blower. It may take years for you to get the payment. So it cannot be your full-time occupation. Just pass on the information and then turn to your normal job. You will have good news one day!
If you have some secret information about a person or company evading taxes on a large scale, you can become a tax whistle-blower for IRS and claim rewards for your effort. How to become a successful whistle-blower? Know well before you get in! Chintamani Abhyankar explains how the system works and what to expect from it.