Historically, IRS tax whistleblower cases have been both frustrating and unproductive. In a Bloomberg article in 2012, Michael Fitzgerald was quoted as saying a referral to the IRS of a whistleblower case is akin to being in “purgatory” since there had historically been little to no communication from the service. Well, that may all be changing now.
In 2006, changes were made to the whistleblower program at the Internal Revenue Service. Since that time, there has been little to no publicity about results from that change. However, three recent settlements, in excess of $48 million, may signal the beginning of a wholesale change in the approach from the service.
In addition to there being a change in the amount of the anonymous program, there also seems to be a more aggressive approach toward referring tax cases to the federal government. By way of example, a case a number of years ago would have resulted in an award of approximately 10% of the amount the IRS recovered. The recent cases have resulted in awards to the relators of between 15% and 30% of the amount collected by the Internal Revenue Service.
A “relator” is the person who provides the information, often through a qualified attorney, to the Internal Revenue Service. Typically, the relator is an employee or close competitor with intimate knowledge of the tax fraud.
The Internal Revenue Service is generally only interested in cases which have a tax fraud exceeding $2 million due to their somewhat limited resources in investigating the alleged fraud. Anyone with information about a potential tax fraud should contact a qualified whistleblower attorney.