Tax Fraud

Tax fraud whistleblowing occurs when an individual informs the IRS of tax fraud. The IRS has certain incentives in place for whistleblowers, and currently awarding whistleblowers between 15 and 30 percent of the total funds they recover. In order to be eligible for this compensation the total amount of the tax fraud, including: tax, interest and penalties, must come out to more than $2 million. However, if a claim is being filed against a particular individual, then the IRS requires that that person’s total income must exceed $200,000.

A whistleblower is much more likely to receive a percentage of the total amount if they are able to prove that tax fraud took place. This is usually done through the use of concrete evidence like paper trails or credible documentation of some kind. The law recognizes a statute of limitations that specify that an individual may not blow the whistle on someone if the original tax fraud occurred more than three years after the tax return was filed. However, this does not apply to cases where fraudulent tax returns were filed in an attempt to commit tax evasion.

IRS investigations are notorious for taking quite some time to complete. This is why having solid proof of the tax fraud is the best way to ensure that the investigation will go swiftly. Once the IRS has finished their investigation the Whistleblower Office will decide on how much financial compensation a whistleblower is entitled to. Whistleblowers who are not happy with the compensation they receive have the right to appeal the initial ruling in the tax court. Payments are not issued by the IRS until the total amount owed has been determined, and paid.

Some examples of the most frequently occurring forms of tax fraud include:

• Abusing charitable deductions
• Abusing trusts
• Overstating tax deductions
• Claiming false tax deductions
• Hiding sources of income
• Not reporting income generated from a stock exchange

These are the most common forms of tax fraud, but are not at all the only kinds of tax fraud that the IRS will recognize as eligible to receive whistle blower compensation for reporting. Successful whistleblowing solely depends on how strong one’s evidence of tax fraud is.