Government and law enforcement agencies at all levels often depend on employees of companies and other organizations to report fraud and other wrongdoing because of their proximity to unlawful activity.
The agencies to which whistleblowers report this information owe these people certain protections and, in some cases, pay handsomely for the information if it leads to monetary recovery for illegal activity. That applies to tax fraud, where both the Internal Revenue Service and the New York Department of Taxation and Finance provide avenues for whistleblowers to report evidence of this fraud.
Nevertheless, the prospect of becoming an official whistleblower can be daunting. That’s one reason why it’s crucial to get experienced legal guidance early if you’re thinking about speaking up.
Reporting tax fraud
The New York Department of Taxation and Finance allows reporting via phone, mail and fax. It also provides information on what activities can constitute tax fraud and evasion. The IRS has a Whistleblower Office that handles reports of tax fraud. The IRS form that needs to be submitted is used to provide details about the alleged fraud and how the whistleblower knows about it.
It’s important for potential whistleblowers to weigh the pros and cons of reporting the alleged wrongdoing anonymously or providing their name and position. By not remaining anonymous, those investigating the report can follow up with questions or requests for additional information. This also gives whistleblowers a chance to receive reward money, if applicable.
After the whistleblower claim is received
The New York Department of Taxation and Finance and the IRS handle whistleblower claims differently. At the state level, after investigating the information provided by a whistleblower, if the state decides to move forward with legal action against the alleged fraudsters, it will file what’s called a “qui tam” lawsuit.
The IRS Whistleblower Office doesn’t file qui tam lawsuits. It will take steps to collect the money owed, however.
At both levels, if the government is successful in recovering money from those involved in the fraud, a whistleblower can receive a percentage of that amount, which can be substantial. We talked in more detail about the protections and rewards for being a whistleblower in a recent blog post.
As noted before, it’s essential to get experienced legal guidance as early as possible. It’s important to know how to collect evidence. For example, removing some documents or even copies can violate company regulations and potentially even be illegal. This guidance can help whistleblowers avoid unnecessary risks and problems and help them secure the rewards they deserve.