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Key Steps in Blowing the Whistle on IRS Fraud

Key Steps in Blowing the Whistle on IRS Fraud

There is nothing wrong with any business trying to lawfully maximize their profits by reducing their tax liability. However, when they attempt to pay less tax than they are supposed to, then other taxpayers have to cover the shortfall, leading to a lot of suffering for all taxpayers.

This is the reason why the Internal Revenue Service (IRS) created a whistleblower reward program to make sure that every taxpayer pays the amount they owe. This means that for reporting serious tax underpayment, you stand a chance of receiving a significant percentage of the recovered amount from the taxpayer. This post will explain some of the key steps you can take to blow the whistle on IRS fraud.

How the Whistleblower Reward Program Works

When it comes to blowing the whistle on IRS fraud, any person can do it, as long as there is an underpayment of taxes– whether intentional or not. By doing this, you can have a reward of at least 15% of the proceeds after the successful settlement of the tax fraud or prosecution. Keep in mind that reports of underpayments of more than $2 million are automatically eligible for the reward program, but any reward for lesser amounts is at the discretion of the IRS. That said, some of the most common illegal tax avoidance methods include overstating of deductions, underreporting of income, stock fraud, hiding of assets, and misusing trusts.

You can receive this reward if you meet a few factors. These include providing relevant information by using IRS Form 211, reporting the tax fraud for the first time, the IRS being able to use the provided information to settle or prosecute the fraud, and you reporting the fraud within three years or seven years depending on the type of tax fraud. However, there is no time limit if the fraudster had the intention of committing tax evasion.

The good news is that the IRS will protect your identity at all costs, though in some situations your identity can become known, like during criminal procedures against the fraudulent taxpayers. This is one of the reasons why you need to hire a lawyer.

Key Steps in Reporting IRS Fraud

First of all, you need to file Form 211 so that you can receive a reward. As explained earlier, you can get a reward of at least 15% of the amount collected by the IRS if the case involves over $2 million in taxes, interest, penalties, and other amounts. Besides filing the right form, you need to provide solid evidence. This means items such as invoices, bank statements, and emails.

Above all, you should consider hiring a lawyer because reports that are done by experts usually get more attention. Unfortunately, the IRS examiners are overwhelmed by the number of cases that they receive every day. Therefore, when they get something new that was put together by a professional, they can prioritize it. Once you do these steps, you can wait for the IRS to tell you whether the case is open or closed.


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by Harvey Carr // Harvey Carr is a contributor to Businessing Magazine.

Opinions expressed by contributors are their own.