October 25, 2017 10:29 pm

Whistleblower Awards Reduced

Individuals who provide information to the IRS may be eligible for a monetary award under Code Sec. 7623. There are two types of awards: discretionary and nondiscretionary. The award in the discretion of the IRS is 15%, up to $10 million (called an “a” case under the “informant claims program”). The nondiscretionary award (“b” case governed by whistleblower rules) is at least 15% but not more than 30% of collected proceeds; the IRS must determine that the information submitted substantially contributed to the detection and recovery of tax.

However, under the Balanced Budget and Emergency Deficit Control Act of 1985, the amount of the award is subject to sequestration. What this means is that awards made from October 1, 2017, through September 30, 2018, must be reduced by 6.6%.

Individuals with information relevant to the IRS can file a claim by submitting Form 211, Application for Award for Original Information. It is mailed to the IRS (find details at irs.gov). https://www.irs.gov/compliance/how-do-you-file-a-whistleblower-award-claim-under-section-7623-a-or-b. The form should be accompanied by the information known to the whistleblower.

Note: A case is now pending in a federal appeals court to determine the meaning of “collected proceeds” to which the percentage is applied. The whistleblowers say it should include criminal penalties and forfeitures; the government is arguing that it should not.

Tax Glossary

Cash method of accounting

Reporting income when actually or constructively received and deducting expenses when paid. Certain businesses may not use the cash method.

More terms