“Tax frauds are not cheating the government, they’re cheating the citizens,” Stewart says.“If they don’t pay, the taxpayers have to pay more. We’re not talking about legitimately lowering taxes, we’re talking about cheating.”
Even seemingly innocent transactions, such as a contractor offering to do work tax-free and off-the-books if paid in cash, is tax fraud and is illegal. For example, a company offering seminars for doctors that sends out receipts saying doctors paid to attend the seminar when they didn’t could be committing tax fraud.
Tax fraud takes a variety of forms, including using false deductions or fake tax shelters, not reporting all revenue and not paying taxes. As of 2006, the IRS now pays tax fraud whistleblowers that report on fraud of more than $2 million between 15 and 30 percent of the amount the IRS collects, with no cap on the amount the whistleblower can collect. Those who report on fraud of smaller amounts can receive up to 15 percent or $10 million as a reward.
And, in many cases tax fraud whistleblowers are not involved in legal proceedings because tax fraud is investigated through administrative proceedings. All the whistleblower needs is evidence of tax fraud and someone to help them navigate the IRS.
READ MORE WHISTLEBLOWER LEGAL NEWS
Whistleblowers who were involved in the tax fraud may also be offered amnesty if they work with an attorney. But it’s important that those who come forward have evidence of tax fraud - not just a feeling that something isn’t right. Those who have enough evidence to help the IRS make a case against a tax cheat, though, could be on the receiving end of a hefty reward.
“If you turn in someone [corporate or individual] who is cheating on their taxes and we can get enough information to recover that money for the government, the person who turned them in gets a percentage of that money,” Stewart says.