IRS Offers Up to 30% Rewards to Successful Whistleblowers, Warns Taxpayers to Watch out for Tax Scams.

By Philip Wolf and Steven L. Walker

On April 11, 2024, the IRS wrapped up its annual Dirty Dozen campaign, which “lists 12 scams and schemes that put taxpayers, businesses and the tax professional community at risk of losing money, personal information, data and more.” See IR-2024-105. The Dirty Dozen campaign is an IRS effort to educate taxpayers about common “tax scams and schemes.” Id. Taxpayers should consult with competent tax counsel if either situation applies:

1. Taxpayers believe the IRS is targeting them because they participated in or were the victims of one of the situations the IRS has described in this year’s Dirty Dozen campaign or
2. Taxpayers wish to blow the whistle and potentially receive up to 30% of proceeds collected by the IRS (should they qualify as a whistleblower). See 26 U.S.C. § 7623(b).

This year, the IRS has highlighted 12 items that taxpayers should remain vigilant about, which are the following:

• Phishing or smishing scams in which unscrupulous individuals pretending to be the IRS send taxpayers emails or texts with suspicious links to websites that prompt taxpayers to fill out personal and financial information or download malware. See IR-2024-84.
• Questionable claims made by unscrupulous promoters for the Employment Retention Credit (“ERC”). IR-2024-85. The IRS has focused significant resources on combatting what it views as abuse of ERC credits, and in recent months, it announced that it would intensify audits and criminal investigations. See IR-2024-78.
• Scams in which criminals attempt to obtain personal tax and financial information by offering to help taxpayers set up accounts on IRS.gov. See IR-2024-87.
• Scams involving false or improper fuel tax credit claims. See IR-2024-89.
• Offer in Compromise mills (OIC mills) where promotors charge large fees and make unreasonable promises to make taxpayer tax debts disappear. See IR-2024-91.
• Fake charities that exploit generous taxpayers. See IR-2024-92.
• Scams involving unscrupulous “ghost preparers” who exploit taxpayers by falsely promising tax benefits, charging high fees, and vanishing with the cash after filing, leaving victims to face the aftermath. See IR-2024-96.
• Bad tax advice on social media that can potentially lead to inaccuracies or identity theft. See IR-2024-98.
• Scammers employing various spearfishing tactics, such as posing as potential clients to gain taxpayer information (a.k.a. “new client” scams). See IR-2024-100.
• Scams related to inflated art donation deductions, charitable remainder annuity trusts misuse, and monetized installment sales. See IR-2024-104.
• Scams involving syndicated conservation easements, micro-captive insurance arrangements, and international schemes involving digital assets and Maltese retirement arrangements. See IR-2024-105.

The IRS encourages individuals to report promoters of abusive tax practices. Sometimes, taxpayers or tax professionals who blow the whistle are eligible for awards. Id.; see also 26 U.S.C. § 7623. These awards can range from 15%-30% of the proceeds that the IRS collects. See 26 U.S.C. § 7623(b). Taxpayers who may have been victims of a scheme or who wish to blow the whistle should consider acting now so that they can potentially minimize the damage and/or, in some cases, claim a whistleblower reward.