The IRS drastically increased its Whistleblower Rewards Program!

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Few words strike more fear in Americans than IRS audit. But now, a new law arms IRS agents with more ammunition in its pursuit for underreported income and illegal activity as the IRS takes a giant step to embracing and rewarding whistleblowers who provide the IRS with valuable information.

Recently, there has been a significant development that substantially impacts IRS whistleblower claims. After years of ambiguity and uncertainty, a new law has cleared the way for tax whistleblowers to finally get paid top dollar for original information provided to the IRS.

The IRS has a program that allows tax whistleblowers to receive between 15 to 30 percent of any proceeds the IRS collects based upon original information provided by the whistleblower. For years, the IRS has fought with whistleblowers as to what should be considered “proceeds” under the program, arguing that any fines or penalties obtained by the IRS due to a whistleblower’s information should not be credited in the award to the whistleblower.

After much litigation and lobbying, the U.S. Congress finally stepped in and adopted a broader definition of “proceeds” so that whistleblowers can receive the full benefit of their cooperation. New legislation signed into law by President Donald Trump now settles the debate and whistleblowers are the clear winners. Under the new definition of “proceeds” under the statute, IRS whistleblowers will be paid a percentage of whatever criminal fines, forfeiture, or nontax related penalties the IRS collects.

Jeffrey Neiman Partner MNR

Jeffrey Neiman
Partner MNR

Blow a whistle on a bank and the bank pays a fine, the whistleblower stands to collect tens of millions of dollars. Turn in a businessman with an undeclared foreign bank account in Switzerland and the IRS collects a penalty, the whistleblower can receive a portion of the monies hidden offshore. Expose a corporate scheme to cook the books and the IRS acts, the whistleblower stands to collect.

Cryptocurrencies and Non tax Penalties and Seizures Are Now Subject to Whistleblower Award

The new law also opens the door to potential whistleblowing to the IRS in the world of cryptocurrencies. One of the major perceived advantages of cryptocurrencies is that their use makes it difficult, if not impossible, for the IRS, or other regulators, to accurately track profit. If a whistleblower is aware of the use of cryptocurrency in order to evade taxes and the IRS begins an audit and then the IRS collects money, the whistleblower will benefit. Under the new law, if the cryptocurrency was used for an illegal purpose, like a fraud scheme, and the IRS seizes the actual cryptocurrency, the whistleblower will receive between 15 and 30 percent of the seized bitcoin.

Jeffrey Neiman

Mark Marshall