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Tax Fraud Whistleblower Lawsuits
By Heidi Turner
Whistleblowers who come forward with information about tax fraud can receive up to 30 percent of the amount collected by the IRS, if the amount of the tax fraud, including penalties and interest, is more than $2 million. Tax fraud whistleblowers are protected under the Tax Relief and Health Act of 2006, and can appeal their award if the amount the IRS gives is not reasonable.
Tax fraud laws are designed to prevent tax fraud and tax underpayments. People who commit tax fraud may use a variety of tactics to avoid paying taxes, including using false deductions or fake tax shelters, hiding losses, not reporting all revenue, exaggerating losses, not paying taxes, not filing taxes, and delaying losses or earnings to a different year. Individuals who have information about tax fraud by a corporation or individual—if the individual's income exceeds $200,000—can recover a reward for alerting the IRS to the fraud.
Prior to 2006, the IRS paid rewards at its own discretion. The Tax Relief and Health Act of 2006 provides a reward for tax fraud whistleblowers. Under the Act, which is modeled on the qui tam provision in the False Claims Act, whistleblowers who alert the IRS to fraud of more than $2 million can receive between 15 and 30 percent of the amount collected by the IRS, with no cap on the total collected by the whistleblower. For tax fraud involving smaller amounts, the IRS offers up to 15 percent or $10 million as a reward. In these cases, whistleblowers cannot appeal the amount awarded.
Tax Fraud Whistleblower
Whistleblowers may be disqualified from receiving an award if they planned or initiated the tax evasion. Those who only participated in it, however, may still be eligible for the award.
In 2012, the IRS awarded Bradley Birkenfeld $104 million for blowing the whistle on a UBS client who defrauded the government. Because Birkenfeld was part of a plan to withhold information about the client, he was reportedly sentenced to 40 months in jail, but because he acted as a whistleblower, he was awarded $104 million. According to The Wall Street Journal (9/14/12), after taxes and fees, Birkenfeld will receive around $45 million.
Tax Fraud Lawsuits
A whistleblower is an individual—usually a current or former employee or member of an organization—who reports wrongdoing on the part of the organization or individuals within the organization. Whistleblower laws are designed to protect the whistleblower from retaliation for reporting on activities that pose a threat to the public or the government, including tax evasion, corporate corruption and safety violations.
Among the laws that protect whistleblowers are the Tax Relief and Health Act and the Fair Claims Act. These laws provide a reward for individuals who file successful suits against corrupt organizations or individuals.
A provision of the False Claims Act allows whistleblowers to bring lawsuits on behalf of the U.S. government for fraud that is committed against the U.S. The U.S. then decides whether to join the case once it conducts an investigation. Qui tam lawsuits are different from typical lawsuits because the plaintiff—the whistleblower—is usually not the victim of the company's actions, but is filing the lawsuit to alert the government of wrongdoing. Whistleblowers who successfully file qui tam lawsuits are entitled to between 15 and 30 percent of the funds recovered for the government.
Qui tam lawsuits are generally used for Medicare fraud, Medicaid fraud, and other fraud that has a financial impact on the U.S. government. Tax fraud, however, does not fall under qui tam.
Tax Fraud Whistleblower Legal HelpIf you have identified illegal behavior by individuals or groups from a corporation or a government agency, please send your complaint to a lawyer by clicking on the link below. All your information will be kept private and confidential, and will only be sent to a lawyer who specializes in Whistleblower cases. There is no cost or obligation to have an attorney evaluate your whistleblower claim.
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