For years, a Swiss banker named Bradley Birkenfeld took part in hiding millions of dollars for wealthy American clients. Birkenfeld eventually spent two and a half years in jail for his tax avoidance scheme. Five weeks after he was released from jail, the IRS sent Birkenfeld a check for 104-million dollars (minus taxes) as part of the IRS Whistleblower Program.
The IRS Whistleblower Office pays money to those who “blow the whistle” on businesses, or individuals that fail to pay their taxes owed. If the IRS uses information provided by the whistleblower, they can award the person up to thirty percent of the additional tax penalty and other amounts it collects. In the case of Birkenfeld, his payment came as part of the settlement of 780 million dollars paid by Swiss bank UBS: Birkenfeld’s former employer.
The whistleblower program is big business. The IRS has shifted focus in recent years towards offshore accounts. They are working closely with law enforcement while they have become more aggressive with companies and individuals trying to hide assets in an attempt to avoid millions in taxes.
The IRS also relies on the help of people with inside knowledge to help ferret out potential crimes. How big is the program? According to the tax agency, in 2014 alone the agency received more than 14,000 claims of fraud and abuse and awarded more than 52-million dollars in claims to 101 whistleblowers for an average of more than $501,000.
While the monetary rewards sound great, you should be aware that making a credible whistleblower claim is far from quick, or easy. The most successful claims typically involve legal teams requiring hundreds of hours of deep research, and can take years to conclude.
To make a credible claim, whistleblowers and their lawyers have to do a lot of groundwork for the IRS. When all the evidence has been gathered, the claim will have to be condensed into a presentation that can easily be understood and well documented. The best cases are ones that are current, well researched, and well supported with legally obtained documentation. Whistleblowers should also clearly understand that when presenting a case to the IRS, they could very well find themselves under attack. Many times whistleblowers, like Birkenfeld, find themselves not only helping the government uncover fraud, but they find themselves the target of investigations as well.
As part of the investigation, the IRS will most likely question the motives of the whistleblower to determine if they have their own hidden agenda, any hidden documents, or information that can be cause for suspicion. There can be a lot of roadblocks for whistleblowers but the results can be well worth it for both individuals as well as for the government. For example, Birkenfeld’s help resulted in the discovery of more than 54-thousand Americans illegally hiding money overseas, which brought in more than 13-billion dollars in revenue to the IRS.
In part two of this series, we’ll look at the best ways to maximize a whistleblower claim with the IRS. There are some guidelines you need to know so that your claim does not go unnoticed.