How would you like to pay 15% less taxes? If everyone paid their fair share you could according to the IRS. A new report indicates that wealthy Americans withhold over $600 billion each year in taxes. Over the next decade the amount of unpaid taxes will exceed $7 trillion. (IRS Commissioner Charles Rettig claims that the so-called “tax gap” is $1 trillion per year)
President Biden and the IRS want to put a big dent in tax evasion. That means bulking up the enforcement arm of the IRS. More audits, more enforced collection actions and more tax cops (IRS-CID special agents). According to the IRS, “These unpaid taxes come at a cost to American households and compliant taxpayers as policymakers choose rising deficits, lower spending on necessary priorities, or further tax increases to compensate for the lost revenue.”
Can the government stop tax cheats? No but it can make a big dent. The problem is that it takes time.
As former tax commissioner in Maine, I know that it takes about five years to get a revenue agent fully trained and up to speed. IRS criminal special agents need a similar amount of time. If you add in both training time and the time to get a case through court, it could take five to seven years before we begin seeing the first results from IRS criminal prosecutions.
IRS Overhaul Plan
So how does the administration propose to address the hundreds of billions in taxes not collected each year?
There are four components to the administration’s plan.
First, the IRS is seeking an additional $80 billion in funding to the IRS budget over the next decade. They claim they need the money because their budget has been slashed by 20% during the past decade. Many of the best auditors and special agents retired and were never replaced.
The proposal also wants to use some of that additional funding to develop a new data management system. They say the current system dates back to the 1960’s! By using data analytics, they think they can better target their auditing efforts.
The IRS also plans to crack down on unregulated tax preparers and increase penalties for aiding and abetting tax evasion. (Since the COVID-19 pandemic began we have been overwhelmed with calls about folks that assist others in obtaining phony PPP loans.)
Finally, the IRS wants banks and other financial firms to provide more them data.
IRS Whistleblowers Play Important Role in Stopping Tax Cheats
Random audits aren’t very effective. Even if the IRS doubled its audit staff, it couldn’t even audit 1% of all taxpayers each year. Extra auditors are needed but unless they know where to look, simply adding more revenue agents, special agents and revenue officers (IRS speak for collections staff) is only part of the answer. Ditto for replacement of their ancient computer system.
This is where whistleblowers play a critical role. Folks with inside information about companies and individuals who are cheating the system are key to reducing the nation’s tax burden.
Congress recognized the importance of whistleblowers and created the powerful IRS Whistleblower Program. That program pays cash rewards of between 15% and 30% of whatever the IRS collects from the wrongdoer. That includes interest and penalties.
While we have been successful in getting the IRS to accept our whistleblower cases, there is still much to be done.
A recent Forbes article said, “The IRS’s failure to take advantage of whistleblower information about large-scale tax fraud and abuse is disgraceful and inexplicable.” While we share that frustration, we believe that any failure by the IRS is mostly due to the lack of staffing.
Unfortunately, the IRS only less than 1% of the tips they receive. Until staffing fully ramps up (we believe that will take five years from the date of any new hires), it becomes critically important to find the best IRS whistleblower lawyers. More on that below.
Rules for IRS Whistleblower Program
The IRS offers for two types of rewards.
If the taxes, penalties, interest in dispute exceed $2 million, the IRS will pay 15 percent to 30 percent of the amount collected. If the case deals with an individual, his or her annual gross income must be more than $200,000. If the whistleblower disagrees with the outcome of the claim, he or she can appeal to the Tax Court. These rules are found at Internal Revenue Code IRC Section 7623(b) - Whistleblower Rules.
The IRS also has a reward program for other whistleblowers - generally those who do not meet the dollar thresholds of $2 million in dispute or cases involving individual taxpayers with gross income of less than $200,000.
The rewards through this program are less, with a maximum award of 15 percent (capped at $10 million). These rewards are discretionary. The rules for these cases are found at Internal Revenue Code IRC Section 7623(a) - Informant Claims Program, and some of the rules are different from those that apply to cases involving more than $2 million.
Unlike the False Claims Act, the IRS Whistleblower Program does not require you to have an attorney. You can simply fill out a form online.
Why are we sharing this information? Good luck in getting the IRS to take your case. As we said earlier, the IRS accepts less than 1% of the tips they receive. Those are terrible odds.
Hiring the right IRS whistleblower lawyer can make the difference between receiving a multimillion check and having your whistleblower tip languish in a black void.
We regularly meet with the director and staff of the IRS whistleblower program. We also have a recently retired IRS special agent on board to help us find someone in the agency interested in your case and even to hand file that case.
Ready to Collect an IRS Whistleblower Reward?
To learn more, visit our IRS whistleblower information page. Ready to see if you are entitled to a reward? Visit us online, by email [hidden email] or by phone 800.669.7782.
All inquiries kept strictly confidential. We accept cases on a contingency fee basis meaning you owe us nothing unless we are successful getting you a reward. IRS whistleblower cases accepted worldwide.