With the new administration calling for a significant increase in funding for the IRS -– many potential tax whistleblowers are considering whether they should now come forward and submit a Form 211 to the IRS. The Form 211 is the path for submitting information (and requesting an award) to the IRS about individuals and businesses that are failing to pay federal tax.
There is no question that the sun is shining on tax whistleblowers. The increase in IRS exam resources will certainly be helpful in ensuring that information from whistleblowers gets a hard look. In addition, the IRS will be under pressure to target its limited examination resources on individuals and businesses that are most likely to be noncompliant with their tax responsibilities. Information from tax whistleblowers has been shown to be an effective tool for helping the IRS to focus on bad actors and leave honest taxpayers alone.
The key for tax whistleblowers is to submit a Form 211 that gets the attention of the IRS. The agency receives thousands of Form 211s a year – and many, nearly half, in fact, are quickly rejected. Even further, only a handful ultimately make it to the finish line in the form of an award. Thus, the challenge becomes submitting a Form 211 that leads the IRS to action and results in taxes being paid.
The IRS Whistleblower Office has been clear about what it wants to see in Form 211 submissions from whistleblowers.
Be specific. Be specific about who is the taxpayer(s) – name, address (EIN, SSN if you have them). If it is a major company – the specific division, subsidiary at issue. Be specific as well – what is the tax issue? The IRS shouldn’t have to guess or piece together what is the tax issue.
Be credible. Provide credible information based on your own knowledge and awareness. In short, the IRS is happiest when you have first-hand (insider information even better) knowledge of the taxpayer and the tax issues. Credible – having documents that support your position (or, at least, can point the IRS to the key documents). Credible – you have a background in the tax issue (example, knowledge in tax).
Be current. Information that is about recent and ongoing tax evasion is the ticket. Stories about tax evasion from 2010 . . . eh (unless involving failure to file or undeclared offshore accounts). The IRS is interested in matters where the tax years are still open.
The IRS is also particularly interested in hearing about emerging issues – something that is new to them – both a tax scam but also a taxpayer(s) that has not been on their radar. In addition, given the drumbeats here in D.C., the IRS will certainly be interested in information about wealthy individuals evading tax.
Don’t speculate. The IRS is not interested in deep thoughts on general issues of concern. The IRS is not interested in theories. While the IRS understands that a whistleblower may not have every piece of the puzzle – they do expect there to be more cheese than holes in the whistleblower’s submission.
Don’t be old. See above. Be current.
Don’t hold back. If you have documents that are critical to your case, provide them up front. You are not getting a second chance to go to the prom, so holding back key documents will only hurt you.
These are the basics. A successful Form 211 is something of an art – balancing providing the IRS a clear (brief) narrative without overwhelming with extraneous information or detours.
The IRS Whistleblower Office has stated that it is currently taking (thanks to COVID-19; mailing issues, etc.) approximately 6 months for a whistleblower claim to be processed by the IRS office in Ogden, Utah – and assigned a claim number. That is the beginning of your patience. Tax whistleblower claims are not paid out until proceeds have been collected (the taxpayer has paid and all rights to appeal have ended) – which can take 7-plus years commonly – as detailed in the IRS Whistleblower Office annual report. Patience is key.
The IRS has also recently announced that it will provide more details on denial letters (stating whether the material was even provided to the field). While a denial is not the news a whistleblower wants to hear, it will provide a window as to whether the Form 211 even made it past the first hurdles.
While patience is required, the IRS Whistleblower Office is clearly welcoming of whistleblowers coming forward and is not reluctant to provide big awards. Now is the time.
About the Author
Dean Zerbe is alliantgroup’s National Managing Director based in the firm’s Washington, D.C. office. Prior to joining alliantgroup, Zerbe was Senior Counsel and Tax Counsel to the U.S. Senate Committee on Finance. He worked closely with then-Chairman of the Finance Committee, Senator Charles Grassley, on tax legislation. During his tenure on the Finance Committee, Zerbe was intimately involved with nearly every major piece of tax legislation that was signed into law, including the 2001 and 2003 tax reconciliation bills, the JOBS bill in 2004 (corporate tax reform) and the Pension Protection Act.