It is estimated that the annual tax gap between those who owe money to the government as taxes and those who actually pay them (i.e. the annual underpayment of taxes) is $345 billion. Under the new IRS Whistleblower provisions, an insider with information about tax fraud can claim a minimum of 15% up to a maximum of 30% of back taxes collected by the government based on information received from the whistleblower. What this means is that each year if, in fact, the annual tax gap is accurately reported at $345 billion, whistleblowers nationwide could potentially receive 15 to 30 percent of this amount plus interest and penalties should they report tax cheats to the government.
The typical case we see here in our practice is where an insider at a business becomes concerned about blatant tax fraud. Examples include executives using corporate funds for their personal use, fraudulent business expenses, diversion of income to off-shore accounts, etc. The forms of fraud in the tax context are myriad and sometimes complex but the whistleblowers that have contacted our firm all are genuinely interested in making sure that tax cheats have to pay their tax bills. Indeed, what is unfair about this?
Given the huge amount of the annual tax gap, Congress hoped to increase whistleblower activity by enacting the new IRS Whistleblower provisions which provide increased incentives for insiders to come forward. Not only is the insider now entitled to a minimum of 15% of all back taxes collected, they also are eligible for up to 30% of such back taxes collected including 30% of interest and penalties collected on the taxes owed. Moreover, as we have previously blogged about, where overt fraud and income tax evasion is involved, there is no civil statute of limitations which prohibits such claims.
As former federal prosecutors who used to prosecute cases involving income tax evasion and false tax returns, we are pleased to represent those men and women who come forward with “insider” knowledge of tax fraud. All citizens should be opposed to tax fraud as we each, in our voluntary tax system, annually pay our fair share of taxes as required by the law. Those that try to evade their responsibilities in some cases should probably be criminally prosecuted but in all cases should be forced to pay what they owe. Finch McCranie is pleased to represent whistleblowers who through their efforts are making sure that tax cheats pay what they owe plus interest and penalties.