Tax fraud and illegal tax avoidance costs the federal and state governments billions of dollars each year. In 2020 alone, the IRS’s criminal enforcement arm identified over $2 billion in federal tax fraud. A failure to pay taxes owed undermines the fair and equitable enforcement of our tax laws and deprives the government of resources needed to fund important public programs.
There are countless ways in which a business or individual can improperly avoid their tax obligations. Some of the most common are:
- Failure to report all sources of taxable income
- Claiming improper deductions or credits
- Engaging in illegal tax shelters
- Failure to forward withheld employee taxes to the IRS
- Failure to pay appropriate taxes on investment activity or cryptocurrency transactions
- Failure to properly account for intercompany transfers
- Failure to identify income that is attributable to U.S. business activity
The primary manner through which whistleblowers can report tax fraud is through the IRS Whistleblower Program, which covers underpayments of federal taxes and related penalties and proceeds. Certain states allow for whistleblowers to pursue state tax-related claims through their false claims act statutes or through other statutory or administrative mechanisms.
The IRS Whistleblower Program
In 2006, the IRS Whistleblower Program was established to administer a system that encourages individuals to come forward with information regarding the underpayment of federal taxes by offering financial awards when that information leads to a successful government recovery. Since its creation, the IRS Whistleblower Program has led to the collection of over $6 billion in underpaid taxes, and has made over $1 billion in awards to whistleblowers.
Individuals who follow the procedures of the IRS Whistleblower Program and whose information leads to the recovery of over $2 million in proceeds may be eligible for financial awards equal to 15-30% of the proceeds collected. In order to qualify for a whistleblower award, an individual must present information regarding the underpayment of tax to the IRS Whistleblower Office according to specific procedures. The IRS will take all appropriate measures to protect the anonymity of whistleblowers, and does not personally identify whistleblowers even when making and announcing its whistleblower awards.
Cohen Milstein attorneys have extensive experience representing individuals who submit claims under the IRS Whistleblower Program and working collaboratively with the IRS to facilitate its recovery of underpaid taxes and to obtain awards for our clients. We regularly handle a wide range of matters involving sophisticated tax issues, such as the U.S. tax liability of international corporate transactions, Ponzi-like tax fraud schemes, and the taxation of complex financial instruments. We will not hesitant to engage tax consultants when expertise regarding a particular aspect of the U.S. Tax Code is called for.
Please contact us directly, at email@example.com, if you believe you’ve witnessed any tax fraud.