TAX FRAUD

Tax 3d concepts

The False Claims Act was designed to encourage whistleblowers to report instances of fraud against the government, providing generous rewards for those who step forward. But the FCA does not apply to tax fraud, and until six years ago, tax whistleblowers were limited in the scope of their recovery. In 2006, Congress provided protections to tax fraud whistleblowers, and the IRS opened an office in 2007 to handle reports. The response was overwhelming: The Whistleblower Office received nearly 1,000 tips involving more than 3,000 taxpayers in fiscal years 2008 and 2009. Hundreds of the allegations involved tax underpayments of more than $10 million, and dozens more of underpayments of $100 million or more.

WHISTLEBLOWER CASE STUDY: TAX FRAUD EDITION

In 2007, an accountant for a large financial services firm in a small town realized his company had underpaid taxes to the IRS – to the tune of $20 million.

He filed a complaint with the newly-established IRS Whistleblower Office, but after he hadn’t heard anything for two years, he secured competent counsel. His attorneys helped him move the case forward, and also helped him keep his identity secret. He was able to prosecute the case fully, and in 2011, the IRS sent him a reward of $4.5 million dollars. The whistleblower has kept his professional reputation intact,and continues to work as a certified accountant.

hundred dollar bills

Key takeaways:

  • The False Claims Act now protects whistleblowers who know about significant tax evasion. If you report fraud in excess of $2 million, you are entitled to a mandatory award of 15% to 30% of the amount collected. If the taxpayer you report is an individual, the individual’s gross income must exceed $200,000. If you report tax fraud below the $2 million or $200,000 thresholds, you may still recover if the government allows it.
  • You can often be anonymous as a whistleblower. You can rely on your attorney to keep your case and your identity confidential.
  • You should be prepared to wait to receive your reward. Even after your case has made it through the IRS Whistleblower’s Office, the IRS will only issue an award after the two year time period for appeal has passed. It is important that you seek counsel immediately so that your case can move through the process as quickly as possible.
  • For more information on experienced attorneys who can help you with your case, see findjustice.com.