IRS Whistleblower Investigation Penalties

The IRS Whistleblower program was designed to encourage the reporting of tax evaders by rewarding those who provided information that leads to an investigation and recovery of tax revenue. While the Whistlerblower reward has been clearly announced and documented since its introduction in 2006, much of the information does not state what happens to the tax violator.

Penalties resulting from a Whistleblower Investigation

Being caught by an IRS Whistleblower is not necessarily different than being found to be a tax evader by the IRS itself. The same penalties apply if caught by the Whistleblower program or by an IRS audit. For each year a taxpayer does not file a return, the penalty can be a fine of up to $25,000 and maximum one year prison sentence. If the individual or company is shown to have willfully failed to file in an attempt to evade taxation, there is a possibility of a felony conviction, with a fine of up to $100,000 and a maximum prison sentence of five years. When the IRS proves that the individual or company has purposefully filed a false return to intentionally, criminal charges for tax evasion will be sought that can result in a prison sentence of up to three years and fines of up to $100,000.

How the Whistleblower Program Relates to the False Claims Act?

The IRS Whistleblower program was created specifically because of the lack of coverage from the False Claims Act exception to tax-related matters. The False Claims Act is federal law designed to discover and remove wasteful and false spending. The statute specifically states that anyone “who knowingly submit, or cause another person or entity to submit, false claims for payment of government funds are liable for three times the government’s damages plus civil penalties of $5,500 to $11,000 per false claim.”

The target of the False Claims Act is government contractors, such as suppliers and builders, who bill the Federal Government at a rate higher than normal, or bill for supplies and materials that were never provided. The statute provides for private individuals and attorneys to submit the claim for government investigation and, if the government allows, prosecution by private attorneys in exchange for a percentage of the amount recovered on the claims.

Help from a Tax Attorney

If you have been accused of tax evasion or making false claims to the federal government, you need to speak with an experienced lawyer immediately. The IRS charge is a criminal offense that can result in significant prison time and fines. As well, the False Claim charge carries large fines and often result in the destruction of your business’s reputation. A lawyer can help prove your case thru tax records, business invoices and other finance materials that can prove your innocence and present a strong defense up front, hopefully avoiding any significant trial needs or prolonged legal expenses fighting your case.