IRS Technical Requirements
There are a few technical requirements you must strictly follow and some risks to be aware of.
Technical requirements
Submitting a Detailed Application. To receive a reward, you must submit more than just the IRS Form 211. You must meet certain technical requirements and provide the IRS with a detailed submission describing the tax evasion, including the evidence in support, the amount of underpayments, and the legal and factual reasons why taxes are owned. You may, and in many cases, should use an attorney to prepare and file the application and attachments and be your advocate before the IRS. Below are two main technical requirements that must be met.
Affidavit. You must sign an affidavit (a statement under oath) certifying that the information supporting your allegation of tax evasion is true. This requirement is not designed to keep away good faith reports of tax evasion, but rather, is an attempt to keep people from using this program as a weapon in family disputes. Requiring an affidavit also reduces someone using this program on an impulse. This is a relatively easy requirement to meet. The next is more difficult.
Dollar Amounts. The new IRS Reward Program has a threshold requirement of $2 million minimum in unpaid taxes to receive a reward. In addition, if your allegations are that a person (instead of a company) cheated on their taxes, that person must have had a gross income of at least $200,000 during any one of the tax years at issue.
When calculating the $2 million figure, be mindful that this means that there was an underpayment of taxes in the amount of $2 million. This is not the same as under-reporting of income by $2 million. For instance, if a person or company is in the 30% tax bracket, they would need to under-report income or overstate expenses by $7 million to equal an underpayment of taxes of $2 million. If you cannot meet these minimum dollar amounts, don't waste your time filing.
Risks to Consider
Confidentiality. The good news is that the IRS reward program maintains confidences. It will not disclose your name to the tax cheater. However, there are some practical limitations on maintaining secrecy. For instance, if the only way that the IRS can prove tax evasion is with your testimony, you will have to allow it to rely upon your information or there can be no hope of a reward. In addition, the tax cheater might guess that there was a whistleblower or that it was you. In short, there is no guarantee that your name will never be made known. But, the IRS does strive to protect your confidentiality.
Time and Energy. It will take a lot of time and energy for you to earn a reward. It often takes years for the IRS to prove tax evasion and collect the money back. You and your attorney will be asked to help the IRS understand and prove certain things along the way. Because your whistleblower reward can only be paid out of actual proceeds collected by the government from the wrongdoer, you may feel like you are caught up in a waiting game. Having an experienced attorney will make this process much smoother.
Forms and other Information about the IRS Whistleblower Reward Program
Click here to read the IRS reward statute.
Click here to read the IRS guidance issued on December 19, 2007.
Click here to see the Form 211 (but remember that you must provide other information in addition to this form).