IRS whistleblowers are individuals who report federal tax underpayments, federal tax frauds, or violations of internal revenue laws (laws which the IRS is authorized to administer, investigate, or enforce) to the Internal Revenue Service (“IRS”).
The IRS Whistleblower Program
Like the U.S. Securities and Exchange Commission (“SEC”) and the U.S. Commodity Futures Trading Commission (“CFTC”), the IRS has its own whistleblower program to reward meritorious whistleblowers by paying them monetary awards. Like the CFTC and SEC whistleblower programs, provided that certain criteria are satisfied, the IRS program allows the IRS to grant awards to IRS whistleblowers who provide specific and credible information that the IRS uses and that leads the IRS to collect proceeds.
The various programs are not the same, however. There are several differences between the IRS whistleblower program, the CFTC whistleblower program, and the SEC whistleblower program.
IRS Whistleblowers May Be Eligible For Mandatory Awards of 15% - 30%
One of the most noticeable differences between the CFTC and SEC whistleblower programs and the IRS whistleblower program is that IRS whistleblowers can qualify for and receive monetary awards in one of two ways. One way is where the awards are mandatory. The other way is where the awards are discretionary.
Generally, to be eligible to receive a mandatory award, the information provided by an IRS whistleblower must pertain to:
- An IRS action in which “the tax, penalties, interest, additions to tax, and additional amounts in dispute” exceed $2 million; and
- If the IRS action concerns an individual taxpayer, that person’s gross income must also be greater than $200,000 for any taxable year covered by the IRS action.
Assuming that the IRS brings a successful action and collects proceeds as a result, and all other requirements for an award are met, an IRS whistleblower who satisfies these two conditions “shall” receive an award of between 15% - 30% of the proceeds collected.
These mandatory award provisions are found in Internal Revenue Code (“IRC”) Section 7623(b). For this reason, IRS whistleblowers who qualify for mandatory financial awards are sometimes referred to as Section 7623(b) whistleblowers.
Discretionary IRS Whistleblower Awards
IRS whistleblowers who do not meet the criteria for mandatory IRS awards may still be eligible to receive discretionary awards.
For these IRS whistleblowers, assuming that all other award criteria are satisfied, the IRS Whistleblower Office has the discretion to pay an award “in a suitable amount” if the whistleblower provided the IRS with “information necessary for detecting underpayments of tax or detecting and bringing to trial and punishment persons guilty of violating the internal revenue laws or conniving at the same”.
These discretionary IRS whistleblower award provisions are found in IRC Section 7623(a) (and 26 CFR Section 301.7623-1). For this reason, IRS whistleblowers who qualify for discretionary financial awards are sometimes referred to as Section 7623(a) whistleblowers.
The Pickholz Law Offices and IRS Whistleblowers
Jason Pickholz has been representing clients with cases involving federal government agencies and law enforcement regulators since 1995. Mr. Pickholz was a partner at two national BigLaw firms. At one of those firms, Mr. Pickholz served as an advisory board member of the law firm’s board of directors.
In 2010, Mr. Pickholz founded The Pickholz Law Offices, with the goal of creating a law firm that could provide the same high quality legal representation as at the big law firms, but with the personal attention to clients’ needs uniquely possible at a specialized boutique.
Since then, The Pickholz Law Offices (the “Firm”) has helped whistleblower clients from across the United States, and from foreign countries, to report frauds and violations to various federal law enforcement authorities, including to the IRS.
Mr. Pickholz has appeared on television and radio, spoken on public panels, taught continuing legal education courses for attorneys, written numerous articles on legal subjects, and is the author of the two-volume book, Securities Crimes, published by leading legal publisher Thomson Reuters.
In recognition of his numerous achievements, Mr. Pickholz was nominated and elected by his peers in the legal community to be a Fellow of The New York Bar Foundation. Being elected as a Fellow is a professional honor that is restricted to just 1% of all of the attorneys in the New York State Bar Association.
If you would like to speak with an IRS whistleblower attorney, please call us at 347-746-1222.