December 21, 2007 12:00 am

Whistleblower Procedures Unveiled

Those who report suspected tax cheats to the IRS may be rewarded for their actions. In December 2006, the Whistleblower Office was set up to process information and make decisions on whether to grant rewards and how much will be paid — and now the IRS has provided the procedures for whistleblowers to follow.

Amount of awards

Awards are made in proportion to the value of information furnished. The amount of the award is at least 15%, but no more than 30% of the collected proceeds if the informant's information substantially contributed to the collection of the tax.

To be eligible for the award, the amount in dispute must be more than $2 million for any taxable year. If the alleged tax cheat is an individual, his or her gross income must exceed $200,000 for any year in question. If these thresholds are not met, the IRS may make an award, but is not required to do so.

All awards are taxable and subject to income tax withholding.

Procedures

Anyone wishing to submit information must use new IRS Form 211, Application for Award for Original Information. The form must be signed under penalty of perjury and is submitted to the Whistleblower Office.

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Tax Glossary

Capital gain or loss

The difference between amount realized and adjusted basis on the sale or exchange of capital assets. Long-term capital gains are taxed favorably. Capital losses are deducted first against capital gains, and then again up to $3,000 of other income.

More terms