Seeking a whistleblower award: does it matter when you apply?

One of the threads we are following in this blog is the IRS whistleblower program.

Whistleblowers are people who alert the IRS to non-compliant taxpayers. Typically, in a whistleblower scenario, this taxpayer will be the whistleblower’s employer.

The law allows for financial awards for whistleblowers who meet certain criteria. But some members of Congress believe the IRS needs to move more quickly to resolve claims for these awards. We discussed that issue in our November 26 post last year.

In today’s post, we will update you on a recent ruling by the U.S. Tax Court that was a win for whistleblowers.

It is well established that when information from a whistleblower leads to the collection of unpaid taxes, a whistleblower may be eligible for a financial award. The IRS form to apply for this is Form 211, to be filed with the IRS Whistleblower Office.

The U.S. Tax Court was asked to decide, however, whether a whistleblower has to file Form 211 before submitting the information about a non-compliant taxpayer. In other words, does providing the information before submitting the application form undercut eligibility for a whistleblower award?

The statute that governs these awards is Section 7623 of the Internal Revenue Code. As Forbes reported last month, the Tax Court held that providing some information to federal agencies before submitting a whistleblower application did not make the claimant in question ineligible for a whistleblower award.

If you are considering becoming a whistleblower, it makes sense to discuss your strategy with a knowledgeable tax attorney. As the recent Tax Court case shows, the timing of the information you provide to the government is something you should consider.