Bradley Birkenfeld, the former UBS banker credited with helping break open Uncle Sam’s investigation into secret untaxed Swiss accounts, is about to be $104 million richer.
The Internal Revenue Service has recommended that Birkenfeld receive that impressive amount after he has now served around two and a half years in federal prison for a fraud conspiracy conviction related to the case.
It’s the largest whistleblower amount ever awarded by the IRS.
Birkenfeld’s insider info helped the IRS collect more than $5 billion in unpaid taxes from foreign banks and nearly 15,000 individuals who used their services to avoid paying U.S. taxes, as well as was a motivator in the Swiss government decision to change its tax treaty with the United States and turn over the names of more than 4,900 U.S. taxpayers who held illegal offshore accounts.
In addition, since the UBS investigation began, more than 35,000 taxpayers have participated in amnesty, or as the IRS prefers to call them offshore voluntary disclosure programs.
Ask and you could receive: The IRS didn’t agree to give Birkenfeld the reward out of the goodness of its heart. Rather, Birkenfeld did what any other tax cheat reporting taxpayer would do; he filed a reward claim with the tax agency.
Under federal law, a whistleblower could be entitled to a reward of between 15 percent and 30 percent of the total previously unpaid tax that is collected. There is no limit on the dollar amount that can be paid out to tax cheat reporters.
Birkenfeld’s lawyers released a redacted IRS summary award report that praised the former banker for providing comprehensive information that was “exceptional in both its breadth and depth.”
Birkenfeld was not in Washington, D.C., for today’s announcement of his award. He’s still serving three years’ probation under home confinement. His attorneys are seeking a presidential pardon for Birkenfeld.
Ratting out tax cheats: If you have information about someone or some company that is ingoing tax responsibilities, follow Birkenfeld’s lead. Well, at least the part about reporting the tax misdeeds.
If you suspect or know of an individual or company that is not complying with the tax laws, you may report this activity by completing Form 3949-A. You may fill out the form online, print it and mail it to the Internal Revenue Service in Fresno, CA 93888. (No street address necessary. The Post Office knows where to find the Fresno IRS office.)
If you prefer, you may send a letter instead of the form to the Fresno address. In that case, the IRS would like you to include, where possible, the following information:
- Name and address of the person you are reporting,
- The taxpayer identification number (Social Security number for an individual or employer identification number for a business),
- A brief description of the alleged violation, including how you became aware of or obtained the information,
- The years involved,
- The estimated dollar amount of any unreported income, and
- Your name, address and daytime telephone number.
The IRS says you don’t have to reveal your identity. But if information on a tax cheat entitles you to a reward, giving your name and contact info is the only way the IRS will know where to send the money.
Also check out the IRS memo on what to expect when providing the agency with information about tax evasion.
That system has improved over the years, but it still takes a while and requires the actual collection of substantial unpaid taxes before the IRS Whistleblower Office says thanks to tax tattletales with cash.
Still, under the right circumstances, the tax cheat reporting and wait can be very rewarding. Just ask Bradley Birkenfeld.
JDKatz, P.C. is a full-service law firm focused on tax law and estate planning. We are dedicated to minimizing your existing liability and risks while providing valuable tax planning to streamline your tax issues in the future. Please call us at 301-913-2948 to schedule an appointment to meet with one of our trusted attorneys.