IRS Whistleblower Office: Reporting Unpaid Taxes

You may be someone who always pays his federal income tax.  Although you are not always happy about it, you do it because it is the right thing to do.

But what if you know about someone else who does not pay his federal income tax?  While one person who has an unpaid tax liability may not seem like a big deal, when you take all the individuals who have unpaid tax liability and consider them together, it adds up to millions of dollars each year that the Internal Revenue Service (IRS) is not receiving that it counts on.

Although the IRS has various methods available to identify people with unpaid tax liability and to enforce collection of that federal income tax, the IRS simply cannot track down everyone.  There are too many taxpayers and the IRS’ resources may simply be spread too thin to identify all unpaid tax liability in a timely manner.  But the IRS realizes this and they have a program designed to get help with this problem.

The IRS has what is known as the IRS Whistleblower Office.  The goal of the IRS Whistleblower Office is to pay money to people who tell the IRS about others who are not paying their federal income tax.  The IRS Whistleblower Office is authorized to pay to a whistleblower up to 30 percent of tax monies that they collect as a result of the whistleblower reporting someone who is not paying their taxes.  The 30 percent may be calculated not just on the actual tax due but also any penalties and interest collected.

Keep in mind that the IRS is looking for credible leads based on legitimate information, not reports against someone because you simply suspect that person is not paying their taxes or because you have some personal vendetta against that person.

There are two types of individuals or situations when the IRS Whistleblower Office has interest in collections through this program:

  • If the individual has an annual gross income of more than $200,000 or the individual reported owes more than $2 million to the IRS when considering taxes, penalties, interest, and any other amounts, the IRS Whistleblower Office will pay between 15 and 30 percent of the amount collected.
  • If the individual has an annual gross income of less than $200,000 or the individual owes less than $2 million, the IRS Whistleblower Office will pay up to 15 percent of the amount collected.

Amounts paid by the IRS Whistleblower Office cannot exceed $10 million for an given report.

If you participate in the IRS Whistleblower program, know that your identity is protected by the IRS where possible.  One exception may be when it is necessary for you to testify in a judicial proceeding about the unpaid taxes.

If you have negative connotations with the term whistleblower, you need to remember that you are simply doing the right thing by participating in the IRS Whistleblower Office program if you have legitimate information about someone and their federal income tax liability.  If you have questions about the IRS Whistleblower Program, you can consult a tax attorney.

by Mark Johnston

Mark has been a contributor to legal web sites related to bankruptcy, tax, and criminal law since 2011. He has an Accounting degree from Texas A&M University.