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How to Report Tax Fraud & Tax Cheats

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Tax entry in DictionaryOne of the largest tax fraud schemes was blown wide open last year when ex-UBS AG banker Bradley Birkenfeld blew the whistle on a $20 billion tax evasion scheme at UBS. His testimony played a “key role” in showing US investigators how UBS was helping Americans hide assets. As a result, UBS agreed to hand over information on 4,450 accounts and pay $780 million to avoid prosecution. Birkenfeld himself received 40 months of jail time because he personally helped billionaire Igor Olenicoff evade taxes, which he didn’t disclose when he talked about the widespread tax evasion schemes. However, when Birkenfeld leaves prison he’ll be rewarded many many millions of dollars for his assistance in catching these tax frauds. A fairly new federal rewards program lets tax informants earn a bounty for those they turn in.

So, how can you get in on the action?

Whistleblower – Informant Award

Before you start turning in everyone you hate, the IRS’s requirements are fairly stringent. They require that you provide specific and credible information and will pay awards if that information results in the “collection of taxes, penalties, interest or other amounts from the noncompliant taxpayer.” While it’s unclear what is considered specific and credible,

How much is the award? There are two types of awards, one for if the total collection (taxes, penalties, interest, or other amounts) is more than $2 million and one if it is less.

  • If the total collection is over $2,000,000 and “a few other qualifications are met,” the IRS will pay 15% – 30% of the total amount collected. Another qualification is that if the noncompliant taxpayer is an individual, their annual gross income must be greater than $200,000. The amount is set by law and you are permitted to appeal a ruling.
  • If the total collection is under $2 million, or it’s over $2M and its an individual taxpayer with an income less than $200k, then the award is 15% up to $10 million. For this award, the Commissioner sets the reward (up to the maximum) but you cannot contest the ruling.

How to Report Tax Cheats

The instructions are available here but essentially you fill out Form 211: Application for Award for Original Information and mail it to the IRS here:

Internal Revenue Service
Whistleblower Office
SE:WO
1111 Constitution Ave., NW
Washington, D.C. 20224

One important note at the bottom of the instructions state – “If the whistleblower withholds available information, the whistleblower bears the risk that withheld information may not be considered by the Whistleblower Office in making any award determination.” Could Birkenfeld’s omission of his role in helping Olenicoff evade taxes be a factor in the office’s determination of an award? Hmmm…

Finally, I think the funniest part about the Birkenfeld saga is that UBS now explicitly bans tax evasion assistance.

(Photo: alancleaver)

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22 Responses to “How to Report Tax Fraud & Tax Cheats”

  1. lostAnnfound says:

    “Birkenfeld himself received 40 months of jail time because he personally helped billionaire Igor Olenicoff evade taxes, which he didn’t disclose when he talked about the widespread tax evasion schemes.”

    Was he the only person that went to jail for this? what about any of the management or executives of the company?

  2. cubiclegeoff says:

    How does one get the information? Either they steal it, which could be considered unethical (or not because you’re stopping someone else from doing much larger harm), or you are the accountant for the person and you break that ethical code by turning them in (or you say you’re staying to your ethics by reporting illegal activity). I think people could fight either way.

    • Or someone is bragging and you overhear it (or they are bragging directly to you). You’d be surprised how often that happens.

      • zapeta says:

        Yeah, some crooks have a hard time not bragging! I’m all for turning someone in…if I have to pay, so should they.

      • cubiclegeoff says:

        I’m always amazed (although I shouldn’t be) with how many criminals are caught because of bragging. And I guess flaunting your wealth, especially when you’re cheating on your taxes to allow for your extravagance, always leads to bragging at some point.

  3. Shirley says:

    “UBS now explicitly bans tax evasion assistance.”

    Once burned, twice shy!

  4. eric says:

    crazy stuff! the last part had me chuckling :P

  5. This seems like the same idea as a cash reward to turn criminals in for crimes. Actually, it’s the same thing this is a crime.

  6. John says:

    Like the article, but after reading, does anyone have a visual of Joseph McCarthy in their minds?

  7. Ron says:

    The lesson: don’t cross the IRS … or Jim!

    I’ve heard businessmen at a bar talking about how they’ve evaded taxes and thought, “Dang, someone’s gonna turn you in!”

  8. Bogart says:

    The IRS are the real thieves if you ask me. Taking our money, and spending it on whatever they please (generally wasteful wars without a clear purpose) without giving us any say in it.

    Anyone who manages to avoid giving them money gets a hats-off from me.

    • saladdin says:

      You have a poor understanding of how the government works. The IRS does what Congress tells them to do and enforces the tax code. Congress spends the money. Congress makes laws.The IRS is nothing more then a collection agency.

      saladdin

      • NateUVM says:

        And one more point on what you said… You DO have a say in it. Like saladdin said, it’s really Congress that you should directing your ire towards, not the IRS. And, clearly, you get a say in what they do every time you vote.

      • Jim says:

        Being upset with the IRS is akin to shooting the messenger… there will always be more messengers.

  9. Paige says:

    I once worked with a woman who said her and her husband had never filed a return (they had been married about 10 years) and she also told me that she claimed extra deductions. Hmm. . . wonder if I should turn them in.

  10. EDWARD KARRER says:

    my wife filed bankruspty before we divorce,she told us bankruspty trustee we where paying rent,my wife where paying the house note about 680.00.from her checking acct.to countrywide fincial. so if thats the case her mother(patrica vickers) was not claiming 680.00 in rent money as earn income,for 3yrs.you can check patrica dianne brothers bankruspty records @ us federal court,gulfport,ms. patrica vickers home is 19096 palmer creek dr. saucier,ms.is this considered frauding the irs.tks ed

  11. princess says:

    i would like the IRS to keep an eye on this Nigeria man that file taxes for people mostly Nigerians.the name of the company is apex financial and tax consultants.in California 14023 crenshaw blvd #10,hawthorn ca 90250.IRS should please keep a close eye on this company.i do not understand why most people claim to be doing some fraudulent act to our great country USA.IRS keep close to this company.

  12. Angel says:

    Today so much ilegal drug money is being used to buy realty and other assets- this is subject to IRS taxes and can also be reported

  13. Nyoma Williams says:

    I submitted a form 211 and mailed it to the Whistleblower office in Washington, DC about 3 weeks ago about an individual daycare business. The woman who owns the business was reported for tax evasion and fraud, when I confronted her about never reporting any of her employers wages to the federal and state government she denied doing it and then a week later her business was burned down and gutted all out. An investigation on who started the fire is still being investigated.

  14. Nyoma Williams says:

    What is the phone number to this office located in Washington, DC? I would like to know what the status is of me sending in the 211


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