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IRS Pays Whistleblowers $53M in 2013

Apr 22, 2014

A total of $53 million was awarded to whistleblowers in fiscal 2013, the Wall Street Journal reports. According to the Internal Revenue Service’s (IRS) most recent report to Congress, the agency collected $367 million last year based on information provided by the tipsters. The report also showed that it has made nine large payments since the program began in 2006.

There are two whistleblower programs under the IRS. One program applies to cases involving less than $2 million of tax and has existed for decades; under this program whistleblowers receive as much as 15 percent of tax collected. The other program, passed in 2006, is for cases involving more than $2 million of tax and pays whistleblowers up to 30 percent of tax collected.

Wall Street Journal notes that awards made to whistleblowers were especially large in fiscal 2012 due to a $104 million payment to whistleblower Bradley Birkenfeld. Birkenfeld, who signed a release that allows him to be identified, disclosed information about Swiss banking giant UBS that caused the US to investigate offshore accounts held by US taxpayers.

In 2013, a large payment of $38 million was made to a whistleblower who provided information about a domestic corporate-tax case.

The IRS report indicated that it had a number of open cases in the large rewards program based on submissions from 1,320 whistleblowers involving 12,192 taxpayers, the Wall Street Journal reports. These taxpayers can include individuals, corporations, trusts or estates. About two-thirds of those submissions are in the early or middle stage. The remaining one-third are nearing the end of the process, and three whistleblowers are expected to receive awards soon.

Whistleblower cases can be lengthy; there are at least four layers of IRS review that can take five to seven years or more. This is because the audit process takes a long time, and delays can lengthen the process. Additionally, the IRS makes payments to whistleblowers once the taxpayer is no longer able to appeal the case or seek a refund. Awards made to whistleblowers are taxable as ordinary income, and the IRS usually withholds at a 28 percent rate on the whole payment unless the taxpayer enters a special agreement, the WSJ says.

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