The False Claims Act, which handles fraudulent claims against the government, does not cover tax or internal revenue whistleblower claims. Instead, the Tax Relief and Health Act of 2006 established a similar program within the IRS to process whistleblower claims that meet specific tax fraud requirements.
Let’s look at tax fraud and typical violations of internal revenue laws for individuals and companies as they relate to the whistleblower provisions under the Tax Relief and Health Act of 2006.
The IRS (Internal Revenue Service) is an agency of the United States government that is accountable for tax collection and enforcement of tax law. In instances of potential tax fraud, the IRS will distinguish whether an error is the result of negligence or a willful act of fraud that is in direct violation of the law. Investigations of fraud, either by IRS tax auditors or reported under IRS Whistleblower Law will look at attempts to:
- Overstate exemptions and deductions;
- Falsify documents;
- Disguise or transfer income unlawfully;
- Misrepresent personal expenses or business expenses;
- Use a fake social security number;
- Claim exemptions for a person who is non-existent; and,
- Underreport income.
The Tax Relief and Health Act of 2006
President Bush signed the Tax Relief and Health Act 0f 2006 on December 20, 2006. Under this program, whistleblowers can be rewarded for their knowledge of tax law violations along with efforts to contribute to government recoveries of these funds. This IRS program allows for lawsuits and allegations similar to Qui Tam lawsuits under the False Claims Act, but is specific to income tax and other tax fraud related cases.
The IRS whistleblower program provides for two types of awards. If the taxes, penalties, interest and other amounts in dispute exceed $2 million, and a few other qualifications are met, the IRS will award the whistleblower between 15 percent to 30 percent of the amount collected.
If the amount collected does not meet the $2 million threshold, or if the case involves individual taxpayers with gross income of less than $200,000, an eligible whistleblower may receive a maximum award of 15 percent of the recovery. More information regarding eligibility and other requirements is available at the IRS whistleblower informant website.
Exposure of tax fraud under IRS whistleblower law is an effective means for individuals to report known instances of tax fraud and receive a monetary reward based on the government recovery.
Whistleblowers can report tax fraud involving individuals or businesses. Generally, income tax fraud is an intentional attempt to avoid tax laws or to be involved in IRS Tax fraud. Income tax fraud can occur in the following conditions when a person or a company either:
- Fails to intentionally file an income tax return;
- Intentionally fails to pay taxes due;
- Deliberately fails to report all income taxes received;
- Makes false claims about income tax; or,
- Prepares or files a false tax return.
If you have credible knowledge of tax fraud that exceeds $2 million and would like to discuss options for reporting this information to the IRS whistleblower program, contact the experienced tax fraud lawyers at Behn & Wyetzner for assistance. All of our consultations are considered confidential and free of charge.