Reporting Someone to the IRS: A Whistleblowers Guide

Reporting Someone to the IRS: A Whistleblowers Guide

The process of reporting someone to the IRS, from submission of complete information to the IRS until the proceeds are collected, may take several years. The IRS does not pay a whistleblower award until after the taxpayer exercises the right to administrative and judicial appeals, which can take many years to resolve. Note that a finding of criminal activity or fraud in a case may result in additional implications for a fraudster – this may include harsh penalties, fines or possibly even jail time.

Staffing and budgetary shortages at the IRS Whistleblower Program have led to troubling delays in the issuance of whistleblower awards. According to the IRS Whistleblower Program’s Annual Report to Congress from Fiscal Year 2020, the program currently takes 10.79 years to process a claim. However, Kohn, Kohn & Colapinto and other whistleblower advocates are actively pushing for legislative reforms to shorten these delays.

Below are a few cases that give you an idea of the time it may take:

  • Bradely Birkenfeld first made a whistleblower disclosure to the IRS in May 2007 about illegal banking practices by UBS bank in Switzerland. Birkenfeld’s disclosure and cooperation with U.S. authorities led directly to the February 2009 settlement in which UBS agreed to pay $780 million in fines, penalties, interest and restitution. Birkenfeld received his record $104 million whistleblower award in September 2012, over five years after his initial disclosure.
  • An anonymous husband and wife whistleblower team, identified only as Whistleblower 21276-13W and Whistleblower 21277-13W, first met with U.S. government agents (including IRS agents) in 2010 and began cooperating with authorities. At the time, the whistleblowers were not aware of the IRS whistleblower program. In April 2013, the whistleblowers filed a Form 211 with the IRS Whistleblower Program. In August 2013, the IRS denied the whistleblowers’ award claims but the whistleblowers filed an appeal in September 2013. Finally, in August 2016 the U.S. Tax Court issued a precedent-setting ruling awarding the whistleblowers $17,791,607.
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Not all cases are treated the same by the IRS. The duration of the process depends on the severity of the case and many other complex factors. Not to mention, the amount paid to whistleblowers is quite substantial, so they must diligently investigate each eligible claim.

Since the inception of the IRS Whistleblower Reward Program, the IRS has awarded whistleblowers over a whopping $1 billion for their information. This number grows every year as more and more whistleblowers come forward with information.