In 2006, the federal government opened the IRS Whistleblower Office so that people who notice tax problems at work or anywhere else in their daily routines can report it to the IRS. In September of 2012, the IRS paid out $104 million to a banker named Bradley Birkenfeld for his role in uncovering the massive tax evasion scheme by UBS AG, a Swiss financial services company; the largest payout yet for a whistleblower. The banker filled out IRS Form 211 and attached documents backing up his claim that a tax law was being broken. He also showed officials where other documentation was held that would help in the investigation.
In order to be able to receive a reward from the IRS, the disputed amount must be over $2 million in taxes, penalties, interest and other amounts for that company. The persons committing the tax fraud must have gross income that is over $200,000 for each year in question to be reported. IRS Form 211, when completed, has to be mailed directly to the IRS at their Whistleblower Office located at 1111 Constitution Ave., NW, Washington, DC 20224. The IRS protects the privacy of whistleblowers to the best of their ability and often tries to investigate the taxpayer without revealing the existence of a whistleblower.
The taxpayer being investigated has the ability to appeal to the IRS for some time which makes receiving a reward a lengthy process; often taking years to complete. The money awarded varies between 15% and 30% of the amount that should have been paid to the IRS by the offender. This reward is for new information only and will not be paid if the company or individual is already being investigated or audited. When filling out IRS Form 211, it is important to be as clear as possible as to what tax laws are being violated as well as to where to find the information necessary to move forward. This may speed up the process of receiving compensation. It’s a good idea to ask an experienced tax professional with help on filling out the form, especially when it comes to flagging tax law abuses. They can also help you to make sure that you are keeping in line with tax codes on your returns as well.