Whistleblower FAQ: Reporting someone for tax fraud

A whistleblower can report an individual or business for suspected tax fraud by filing Form 211, Application for Award for Original Information, through the Whistleblower Office at the Internal Revenue Service (IRS).

The intake and initial review process generally takes between 30 and 60 days at which point the Whistleblower’s Office makes the determination as to how they will proceed with the claim.

If the claim is rejected, the IRS will issue a “rejection or denial letter” to the whistleblower explaining why the claim was rejected. Per the IRS:
Claims rejected or denied as a § 7623(b) claim have an administrative proceeding and are eligible to be petitioned to the tax court.

For example, if the claim is rejected because the claim was missing information and/or is incomplete, the whistleblower has the option to bring their claim to the tax court for a secondary review. Common Initial Review Rejection/Denial Reasons:
– No specific or credible tax issue,
– Claim is missing information,
– Claim is purely speculative,
– Insufficient Assessment Statute, or
– Assessment Statute Expired

If the claim survives the initial intake a review process the IRS will assign a Subject Matter Expert (SME) who reviews the submission. This SME review generally takes 90 days.

Field Examination occurs after the SME review and takes one to three years. During this time, IRS reexamines the case and contacts the suspected fraudulent taxpayer with their findings.

The whistleblower has two possible outcomes: if the taxpayer agrees with the findings of the IRS, the case moves to a Preliminary Award Recommendation, which takes roughly 60 days. If the taxpayer does not agree with the exam, the case moves to Appeals/Tax Court, which generally takes three to ten years.

If the Tax Court rules in the taxpayer’s favor, the claim gets rejected and the whistleblower is issued the Rejection or Denial Letter. If the Tax Court rules in favor of the whistleblower’s claim, the case moves on to the Preliminary Award Recommendation step.

Once the IRS has determined the whistleblower’s claim is valid, the taxpayer must either agree to the field exam or the Tax Court has rules “all or some adjustments [were] upheld.” For the IRS to issue an award at this step, the fraudulent taxpayer must pay back the taxes owed. According to the IRS, this step in the process “may take up to the full collection statute of 10 years.”

Once the taxpayer has complied by paying the owed amount in full or a partial payment, the case moves to the Award Determination process, which generally takes 90 days.

The Award Determination process “starts the administrative proceeding” at which point the IRS will issue a Preliminary Award Recommendation Letter (PARL) to the whistleblower. The PARL may be accepted or rejected by the taxpayer. If the whistleblower agrees to PARL, the case moves on to Award Payment Processing. If the whistleblower does not agree to PARL or doesn’t respond to the PARL, the IRS issues a Final Determination.

The whistleblower may petition the Tax Court if they do not agree with the PARL. If they choose not to petition in Tax Court, the case moves to the Award Payment Processing step, as outlined above.