Yes, you read correctly! You can earn money by providing the Internal Revenue Service (IRS) with specific tax-related information.
The IRS has a program that pays individuals to be tax whistleblowers. Since its inception in 2007, the IRS Whistleblower Office has awarded an astounding $1.1 billion to informants whose tips have led to an additional $6.6 billion in tax revenue.
If you’re intrigued by this opportunity, read on as we delve into how the IRS can pay you to be a tax whistleblower and the challenges in earning this award.
The IRS incentivizes individuals to come forward with information on tax evasion and other forms of noncompliance, ultimately aiding the government in collecting additional revenue.
The IRS Whistleblower Office is explicitly interested in credible claims related to tax underpayments or violations of revenue laws.
Suppose you possess information that could help the IRS collect additional tax revenue. In that case, you can initiate the process by filling out Form 211 and sending it, along with supporting documentation and evidence, to the Whistleblower Office.
What to Report to the Whistleblower Office
Each fiscal year, the IRS Whistleblower Office compiles an official report outlining common tax issues reported to Congress. In 2022, these included:
- Underreporting income
- Failure to file taxes
- Wage under-reporting
- General allegations of fraud
- Tax fraud
- False dependent exemptions
- Employee vs. subcontractor issues
- Rental income
- Capital gains tax
- Offshore issues
Navigating the IRS Whistleblower Program: From Filing to Reward
How to Get the Reward
You must gather all relevant documents and evidence that could tie the taxpayer to the alleged infraction to increase your chances of receiving the tax whistleblower reward.
This step can be challenging as the IRS relies on concrete evidence and needs help to act on speculation.
Once you’ve filed your claim, you’ll need to be patient.
The Whistleblower Office will assess the information, build a case, and, if successful, collect additional revenue from the taxpayer.
The taxpayer has the opportunity to exhaust all appeal options. Once the process is finalized, you could be awarded a percentage of the collected proceeds, typically ranging from 15% to 30%.
It’s important to note that the percentage of proceeds may decrease if you provide publicly available information or intentionally set up noncompliance.
Awards are often categorized as section 7623(a) or 7623(b).
How Much Does the IRS Payout?
The IRS publicly discloses information about whistleblowers and the tax collections stemming from their knowledge.
In the fiscal year 2022, the IRS paid out 132 awards to tax whistleblowers, totaling $37.8 million, a portion of the $172.7 million collected due to whistleblower information.
With 5,084 submissions and 12,597 claims processed for the year, it’s evident that the IRS takes this program seriously.
In 2021, the IRS paid out $36.1 million to whistleblowers, indicating an increase in 2022.
This demonstrates that the IRS generously rewards tax whistleblowers who provide valuable information.
How Difficult Is It To Get the Award?
Earning a whistleblower award from the IRS is no walk in the park. Specific criteria must be met:
- The funds involved must exceed $2 million.
- If the subject is an individual, their gross income must exceed $200,000 for the taxable year of the alleged infractions.
Moreover, the process can be lengthy, with awards typically only paid once the taxpayer exhausts all appeal rights.
This can result in significant delays, making understanding tax-law intricacies and IRS regulations essential.
While becoming a tax whistleblower may not be the most conventional way to earn money, it can be lucrative if you possess credible information about tax noncompliance.
Ensure your documents are in order before submitting a claim to avoid inaccuracies. Good luck with exposing tax fraud and receiving your well-deserved award!