How the IRS Whistleblower Process Works
Understand the formal process for reporting tax non-compliance to the IRS. This guide covers the procedural framework and important legal protections.
The Internal Revenue Service administers a formal whistleblower program that provides a channel for individuals to report information about tax fraud and underpayment. The program uses specific and credible information from the public to enhance tax law enforcement. The modern framework for the program was established by the Tax Relief and Health Care Act of 2006, which created a dedicated Whistleblower Office. The program is intended to address substantive violations of tax law, not to resolve personal tax problems or business disputes.
Qualifying as a Whistleblower
An individual’s eligibility for the IRS whistleblower program hinges on which of two distinct paths their claim follows, determined by monetary thresholds under Internal Revenue Code (IRC) Section 7623. The primary program is for large-scale cases where the total amount in dispute, including taxes, penalties, and interest, exceeds $2 million. If the report concerns an individual taxpayer, that person must also have a gross income of more than $200,000 for at least one of the tax years in question.
For claims that do not meet these thresholds, a second, discretionary program exists that covers all other submissions. Even individuals who participated in the tax non-compliance may be eligible for an award under either program, provided they were not the masterminds who planned and initiated the scheme.
Required Information and Documentation
A whistleblower submission begins with IRS Form 211, Application for Award for Original Information, which is required to formally file a claim. Completing Form 211 requires detailed information about the alleged tax violation. The applicant must identify the person or business being reported and provide a written narrative describing the non-compliance, the scheme, the individuals involved, and the affected tax years. The form also asks for an estimate of the total tax underpayment, if known.
The strength of a claim lies in its supporting documentation, as this evidence must be specific, credible, and directly substantiate the allegations. Examples of documentation include:
- Copies of financial ledgers
- Bank records
- Contracts
- Internal emails
- Transaction histories that reveal the non-compliance
If a whistleblower does not possess certain documents, they should describe the evidence and its location on the form. The submission must also explain how and when the information was obtained and describe the whistleblower’s relationship to the person being reported.
Submitting Your Whistleblower Claim
Claims are submitted by mail. The complete application, including Form 211 and all attached evidence, should be sent to the Internal Revenue Service, Whistleblower Office – ICE, 1973 N Rulon White Blvd., M/S 4110, Ogden, UT 84404. Because space on the form is limited, it is common to use attachments for detailed explanations and reference them in the appropriate fields on the form, such as providing a separate narrative for the description of the violation.
After mailing the claim, the whistleblower will receive a written acknowledgment from the IRS. This letter confirms receipt and assigns a unique claim number. This number is the official identifier for the case and must be used in all future correspondence with the Whistleblower Office to track the claim’s progress.
The Award Determination Process
A whistleblower award is contingent on the IRS using the provided information to successfully recover funds. An award is paid from “collected proceeds,” which includes unpaid taxes, penalties, interest, and other amounts the government collects. The process can take several years, as an award is not paid until the taxpayer has exhausted all appeal rights and the collection is final.
The potential award amount differs between the two program paths. For large cases meeting the $2 million threshold, the award is mandatory and ranges from 15% to 30% of the collected proceeds. Whistleblowers in this program also have the right to appeal the IRS’s decision in Tax Court. For smaller cases, the award is discretionary, capped at a maximum of 15%, and there is no right to appeal.
The IRS Whistleblower Office weighs several factors to decide the final percentage. Positive factors that can increase an award include the whistleblower providing exceptional cooperation and assistance, identifying hidden assets, or providing information that helps the IRS understand complex transactions. Conversely, negative factors can reduce an award, such as the whistleblower having a role in the tax evasion scheme, delaying the report to the IRS, or profiting from the non-compliance. If a claim is based on public information, the award may be reduced to a maximum of 10%.
Whistleblower Rights and Protections
Individuals who report tax non-compliance are afforded legal protections for confidentiality and against retaliation. The IRS is legally bound to protect a whistleblower’s identity under the provisions of IRC Section 6103, which treats the submission as confidential tax return information. While the IRS works to keep the whistleblower’s identity private, it may be disclosed in rare circumstances if their testimony is required for a judicial proceeding, and the IRS must weigh this necessity against the need for confidentiality. The Taxpayer First Act of 2019 also allows the IRS to share certain case information with the whistleblower, such as a notification when their case is referred for an audit.
The law also provides anti-retaliation protections for employees. An employer is prohibited from firing, demoting, harassing, or otherwise discriminating against an employee for reporting tax fraud or underpayment. An employee who suffers such retaliation may have legal recourse, including suing for remedies like reinstatement, double back pay, and compensation for other damages.