IRS Whistleblower Program: Awards for Reporting Tax Underpayment
The Internal Revenue Service whistleblower program pays 15 to 30 percent of collected proceeds where the amounts in dispute exceed 2 million dollars, or where an individual taxpayer has gross income above 200,000 dollars. Submissions are made on Form 211 and can be filed anonymously through an attorney.
Two tracks with very different outcomes
Section 7623(b) is the mandatory award program. If the case meets the thresholds and the IRS collects, an award between 15 and 30 percent is required rather than discretionary, and a denial can be appealed to the United States Tax Court.
Section 7623(a) is the discretionary program for smaller matters. Awards are capped lower, are not mandatory, and generally cannot be appealed. Getting the submission into the mandatory track is the single most consequential drafting decision.
What qualifies
The program covers underpayment of any federal tax, which is broader than fraud in the criminal sense.
- Unreported income, both domestic and offshore
- Abusive tax shelters and listed transactions
- Transfer pricing arrangements that shift profits improperly
- Employment tax fraud and worker misclassification
- Improper deductions, credits, and valuation of assets
- Failure to file information returns or report foreign accounts
- Nonprofit organizations operating outside their exempt purpose
The timeline is long
IRS whistleblower cases are slower than any other program. The Service must examine, assess, and actually collect before an award is paid, and the taxpayer retains appeal rights throughout. Five to ten years from submission to payment is normal.
That is worth knowing before you start. The awards can be very large, and the wait is real.
How a submission is built
A Form 211 is only as good as what supports it. The Service receives many submissions and prioritizes those that let an examiner open a case quickly.
That means identifying the taxpayer precisely, specifying the tax years, explaining the mechanism of the underpayment, estimating the amount, and describing how you know. A submission that says a company is cheating on its taxes without that structure will not be worked.
Frequently asked questions
Can I file an IRS whistleblower claim anonymously?
Yes, through an attorney. The Service communicates with counsel and your identity is not disclosed to the taxpayer.
What is the difference between 7623(a) and 7623(b)?
7623(b) is mandatory, pays 15 to 30 percent, applies above the thresholds, and allows Tax Court appeal. 7623(a) is discretionary, pays less, and is generally not appealable.
Is my award taxable?
Yes, awards are taxable income. Discuss the treatment and the timing with a tax professional before payment.
How long does it take?
Five to ten years is typical, because the Service must complete examination, assessment, and collection before an award is determined.
The attorneys who handle these cases
Related reading
Talk to a whistleblower attorney before you report
A conversation costs nothing and is confidential. We will tell you honestly whether what you have describes a case, and what the first-to-file rule means for your timing.