The informant may file a claim for reward on Form 211, Application for Reward for Original Information.

The reward rate will normally not exceed 15 percent of the additional taxes, penalties, and fines collected as a result of the informant’s information.

Rewards can be paid for information that prevents the payment of a false or erroneous claim for refund, as well as for information that results in the collection of additional taxes, penalties, and fines.

Claims filed by a corporation, partnership, etc., must be signed by an officer or employee who has the authority to legally bind the entity and require the most knowledgeable employee of the entity to provide testimony in any judicial or administrative proceeding which may arise as a result of the information provided.

If the executor of an estate files Form 211 because the informant died without executing a formal claim for reward, the claim should be accompanied by: certified copies of letters testamentary; letters of administration; or other similar evidence to indicate the representative’s authority.

The informant should be furnished Publication 733, Rewards for Information Provided by Individuals to the Internal Revenue Service, and asked to file a formal claim on Form 211, Application for Reward for Original Information, as soon as practicable.

If the facts developed in the examination indicate that a reward is apparently allowable, but the informant has not yet filed a claim, he/she should be asked by the examiner/revenue officer, etc., who is conducting the audit/collection activity, to file a claim or explain why it is inadvisable to file a claim at that time.

Informants’ claims should be numbered in each Service Center as received using a consecutive numbering system, preferably prefixed by the symbol of the office.

A computer database file (or equivalent) and/or a card index file may be used to control and track each informant’s claim, showing the following: informant’s name, address, and TIN; claim number; taxpayer’s name, address and tax year(s) involved; date of receipt of informant’s information; name of the district to which the claim was sent (if applicable) and date of transmittal; and subsequent history as to disposition.

Informants’ Claims should be acknowledged as soon as possible after receipt. Letter 1891 (SC) shown in Exhibit 4 of this section should be used for this purpose.

However, the true name and address of the informant are recorded in a file handled in a confidential manner in the Service Center Director’s office.

When filed, the claim for reward on Form 211, must be signed, under the penalties of perjury, in the informant’s true name in order that payment may be made only to the informant in his/her legal name.

A claim for reward is not acceptable if signed on behalf of a claimant by his/her agent, regardless of any existing power of attorney.

Informant’s name, address, and TIN.

Name, address, and TIN of taxpayer alleged to be in violation of the tax laws.

Informant’s former/present relationship with the taxpayer.

Extent of assistance given by the informant.

Whether the information caused the investigation, or was a direct factor in the recovery of taxes, penalties, and fines, or prevented the payment of a false or erroneous claim for refund.

Whether delinquent returns were secured.

Whether there were offsetting adjustments.

Whether direct payments were made by Criminal Investigation for the same information and, if so, the amount of direct payments.

Whether criminal fines were assessed and collected and the amount thereof.

The results of the examination and value of the information furnished in relation to the facts developed by the investigation, the adjustments brought about by the information, and the amount of taxes, penalties, and fines recommended as a result of those adjustments.

Whether the taxpayer appealed.

A recommendation by the examiner or special agent as to whether the informant is entitled to a reward.

The file should include a copy of the evaluation report prepared by the examiner of the return(s).

Quality Measurement Staff should send the original evaluation report to the Service Center Informants’ Claims Examiner for tracking Purposes.

After closing by the Appeals office, a copy of the appeals officer’s report will be sent to the Informants’ Claims Examiner at the Service Center.

The special agent will prepare the evaluation report. The cooperating revenue agent shall indicate his/her concurrence or nonconcurrence with the recommendation contained therein by signing a statement as follows: "I (do) (do not)concur with the recommendation contained herein. __________, Internal Revenue Agent."

After the cooperating revenue agent has indicated his/her concurrence or nonconcurrence with the recommendation, the special agent will forward the report, through his/her group manager, to the Chief, Criminal Investigation, for processing.

If the cooperating revenue agent does not agree with the recommendation of the special agent as to the allowability of a reward or the percentage thereof, he/she will prepare and forward, through his/her group manager, to Field Territory Manager, a separate evaluation report setting forth the reasons for his/her disagreement.

All disagreements will be resolved before the claim is sent to the Service Center Informant’s Claims Examiner.

Note his/her concurrence and withdraw the evaluation report.

Forward it to the Service Center Informants’ Claims Examiner, whether or not a final determination of tax liability has been made.

The Service Center Informants’ Claims Examiner will process the claim for rejection.

Use Letter 1010 (SC). See Exhibit 2–7.

The Revenue Officer (RO) prepares the evaluation report and forwards the file to his/her group manager for approval.

The file should contain: RO’s evaluation report, memorandum or case history sheet, adequately annotated to indicate a basis for computing a reward; copies of any returns secured; any other documents which may assist the Informants’ Claims Examiner in processing the claim to allow a reward or for rejection.

After approval, the Group Manager forwards the file, under proper security protection to the Director, Compliance Division, Attn: Informants’ Claims Examiner.

In cases where an informant provided information, but no claim has been filed, no evaluation report is required unless it is known that a claim will be filed.

In such cases, the revenue officer sufficiently annotates the case history to indicate the nature and value of the information provided by the informant in the event a claim is subsequently filed.

In "unable to locate" situations, the RO sends a memorandum or fact sheet, through his/her group manager, describing the steps taken to locate the taxpayer, to the Service Center, Director, Compliance Division, Attn: Informants’ Claims Examiner.

Each successive reviewer will either approve the report or prepare a memorandum of exceptions thereto.

Approval will be indicated by appropriate entries on the report.

If not in agreement, the reviewer will indicate his/her nonconcurrence and securely attach a signed memorandum, stating his/her exceptions, to the evaluation report.

All disagreements will be resolved before the case is sent to the Service Center Informants’ Claims Examiner.

For specific and responsible information that caused the investigation and resulted in the recovery, or was a direct factor in the recovery, the reward shall be 15 percent of the amounts recovered, with the total reward not exceeding $2 million.

For information that caused the investigation and was of value in the determination of tax liabilities although not specific, the reward shall be 10 percent of the amount recovered, with the total reward not exceeding $2 million.

For information that causes the investigation, but had no direct relationship to the determination of tax liabilities, the reward shall be 1 percent of the amount recovered, with the total reward not exceeding $2 million.

No reward will be paid if the recovery was so small as to call for payment of less than $100.00 under the above formulas.

Rewards should be allowed in the exact amount produced by the applicable percentage calculation.

Two or more of the above bases (percentage rates) for determining the reward may be involved in one claim case.

If, for example, specific and responsible information was given resulting in certain recoveries, but the examiner determined additional taxes as a result of adjustments not mentioned by the informant., or if the examination led to an investigation of related taxpayers.

Recoveries from taxpayers related to the taxpayer(s) identified in the claim for reward should be considered in determining the amount of the reward if the examination lead to the investigation of the related taxpayers.

The basis of reward for recoveries from such related taxpayers would depend upon whether the recoveries were directly or indirectly the result of the informants’ information or whether such recoveries were merely incidental to the original examination.

If the assessed liability is settled by an offer in compromise or closed with an amount less than the liability assessed due to inability to pay, see procedures for Assessed Deficiencies Determined Uncollectible.

In a case where two or more informants individually provided original information leading to the recovery of additional tax, penalties, and fines from the same taxpayer, each informant’s claim for reward should be judged on its own merits. The individual rewards should be considered in accordance with the criteria, computation formulas, and limitations stated above.

The special agreement must be approved by the Commissioner, or his/her delegate as authorized by Delegation Order 204.

The field office must send a request for approval to the Deputy Commissioner in Headquarters.

The original agreement and the signed Headquarter’s approval memorandum will be maintained in the Informant’s Claims Examiner’s file in the appropriate service center.

A copy of the agreement will be maintained in the office working the case.

The reward, if appropriate, should be computed in accordance with the terms of the agreement.

Prior to preparing the allowance memorandum to the Service Center Director (or designee), review the file to determine whether the special agent has noted in the evaluation report that the informant has received direct payments for the same information.

If direct payments were made, reduce the reward amount computed in accordance with the above formula(s) by the amount of the direct payment(s).

Reflect amount(s) of such direct payments in the memorandum to the Service Center Director (or designee).

Periodically, request a transcript of the taxpayer’s account. The transcript, normally noncertified, should show the amounts of any taxes, penalties, fines, and interest assessed and paid after the informant’s information was received. The transcript should also show any deficiency assessed and paid as the result of the filing of a delinquent or amended return after the informant’s information was received.

However, unforeseen events may cause the final reward payment to be less than the amount transferred, resulting in excess funds remaining in Special Account Symbol 20X5433.1.

Such funds must be returned to the general revenue fund.

After a reward has been paid, the Service Center Informants’ Claims Examiner will review the file to determine if the amounts transferred into Special Account Symbol 20X5433.1 exceed the total reward paid or credited. Return any excess funds in Special Account Symbol 20X5433.1 to the general revenue fund.

The sample memorandum shown in Exhibit 2–3 can be used for this purpose.

All rewards paid after June 1997, regardless of the date the claim was submitted, are subject to repayment.

Forms 211 received after June 1997 must contain the agreement to repay the reward or an appropriate percentage thereof, if the collection on which it is based is subsequently reduced.

Any version of Form 211 not containing the above stated agreement that are received by the Service after 6–97 will be returned to the informant for resubmission using the new Form 211 (Rev. 6–97) that contains the repayment agreement.

Place the case in a suspense file.

Periodically request a transcript of the taxpayer’s account to determine whether a refund of taxes, penalties, or fines has occurred.

Close the case if the period of limitations for filing a claim or suit for refund has expired, and no refund was paid.

If the transcript indicates a refund has been paid subsequent to the reward payment, request the return(s)and the examination administrative file from central files.

Refer the complete case file to the responsible Field Territory Manager for a determination as to whether it is appropriate to recover all or a portion of the reward.

As soon as the Territory Manager returns the file, review the file to determine if the informant has made a repayment of the reward (this should be indicated on Form 3210, Document Transmittal, which was prepared by the Field Territory Manager, in the area office.

If a check for repayment exists, prepare a routing slip from the Director, Compliance Division, to the Chief, Receipt and Control Branch, attaching a copy of the Form 3210 and the remittance check from the informant. State on the routing slip: "Repayment of Informant Reward, deposit in Treasury Symbol 20X5433—see also the attached copy of Form 3210."

Treat the case as "closed" after it is returned by the district office and, if applicable, the remittance has been routed to the Chief, Receipt and Control Branch.

Determine whether it is appropriate to recover all or a portion of the reward from the informant.

Apply reasonable efforts in accomplishing such recovery, if deemed necessary, by sending a notice to the informant that a repayment of the reward, or appropriate percentage thereof, is required because the recovery upon which the reward was based has been reduced. Ask the informant to remit a check, payable to the Internal Revenue Service, to the Field Territory Manager.

If a repayment is received, prepare Form 3210, showing that the attached check represents a "Repayment of Informant Reward, Deposit in Treasury Symbol 20X5433."

Include the original claim number and the amount of repayment.

Annotate the file as to the actions taken to compute and recoup the appropriate percentage of the reward and transmit the complete file, along with the remittance check and the Form 3210, to the Director Compliance Division in the Service Center, Attention: Informants’ Claims Examiner, for further processing (in accordance with paragraphs (2)f and (2)g above).

If a repayment is not due/received, annotate the file as to the actions taken and return the file to the Director Compliance Division in the Service Center, Attention: Informants’ Claims Examiner, for closing.

If the amount of the taxpayer’s refund plus the reward exceed the total amount of taxes, penalties and fines collected as a result of the information provided, repayment of the excess by the informant should be considered.

However, if the information results in obtaining a delinquent return and collection of taxes, fines, and penalties, a reward may be granted.

The circumstances surrounding the filing of a delinquent or amended return should be reviewed to ascertain if such filing in any way resulted from the fact that information concerning the taxpayer had been furnished.

If a delinquent or amended return was a direct or indirect result of information furnished, the amounts recovered due to the filing of such returns should be considered in establishing the value of the informant’s information.

Taxpayers who are in fact jointly involved in a scheme to defraud or evade.

Taxpayers who with knowledge are beneficiaries of the scheme.

Taxpayers who as a group have adopted the same scheme, etc.

For example, if the closing inventory for one year is increased, resulting in an increase in income for that year, the opening inventory for the next succeeding year will be correspondingly increased, resulting in a decrease in income for that year. The deficiency for the first year is offset by the corresponding decrease in income for the subsequent year, usually resulting in no net tax recovery.

Similarly, if an item claimed as an expense on a return is capitalized by the examiner, resulting in an increase in tax, a corresponding tax savings is effected for subsequent years through the use of the deduction for depreciation. In such cases the end result will, ordinarily, be no net recovery to the Service. The same offsetting adjustment may be obtained when income for a taxpayer for one year is transferred to another year, or when income is transferred from one taxpayer to another taxpayer. If no net tax recovery is effected, no reward is in order. When, however, due to the effect of the variance in tax brackets or a change in the tax rate, there is a net recovery to the Government, such recovery should be evaluated under the general rule.

Information may be furnished and claim for reward filed with respect to the returns of one taxpayer for several years. If one of the years is closed with assessment and payment of a deficiency, but the other years are still under examination, no reward should be granted for the closed year until examination of all years has been completed. This is true since adjustments made to the returns for the open years may result in offsetting adjustments, no reward should be allowed until the overall results of the information furnished may be evaluated.

A reward should not be paid with respect to a particular tax year until the deficiency (tax, penalties, and fines) has been paid in full for that specific tax year. However, a partial reward may be paid if, for example, it can be ascertained in a criminal prosecution case that the conviction was directly or indirectly attributable to the informant’s information. A reward allowance based on the fine when paid may be made as a partial allowance prior to the civil settlement of the tax liability.

Another example is where there are multiple tax years involved with a particular claim for reward, and the deficiency for one or more of the years has been paid in full. A reward allowance based on the collections for the fully satisfied tax year(s) deficiency may be made as a partial allowance prior to the satisfaction of the deficiency for the remaining year(s).

A notation to that effect should be made on the original Form 211 and the form should be held in a suspense file awaiting subsequent collection, if any, of the assessed and outstanding deficiencies.

The informant should be told that he or she may receive an additional reward, if circumstances permit, and that he or she will be notified accordingly.

The filing of a separate Form 211 is not required to pay an additional reward.

When an informant is pressing for payment, and his/her claim cannot be allowed or rejected under normal procedures at such time, he/she may submit a statement substantially as follows: "I, (name of informant), hereby waive any reward applicable to the uncollected portion of taxes, fines, and penalties covered by my Application for Reward for Original Information No. ___, and request that my claim be processed as soon as possible."

Include a space for the Informant’ Signature, the Date, and the informant’s name and address, typed.

Use an appropriate version of the sample letter shown in Exhibit 2–6 to transmit the waiver to the informant. The sample letter should be modified as necessary to meet the particular need/situation.

After the signed waiver is returned by the informant, the claim will be processed and the reward computed based on collections made up to the date the waiver is signed.

No further reward will be payable to the informant.

Such cases may be held in suspense until the statute of limitations for collection expires, unless the informant wishes to waive any additional reward as discussed in section 2.14 above.

The Informants’ Claims Examiner should periodically review the account to determine whether additional collections have been made which would justify an additional reward to the informant.

In cases considered uncollectible, and the revenue officer determines there is little or no likelihood that further collections will be made, the Informants’ Claims Examiner should contact the informant and offer to close the case based on collections to date.

Use the waiver described in the previous section.

Use an appropriate version of the sample letter shown in Exhibit 6 to transmit the waiver to the informant. The sample letter should be modified as necessary to meet the particular need/situation.

After the signed waiver is returned by the informant, the claim will be processed and the reward computed based on collections made up to the date the waiver is signed.

No further reward will be payable to the informant.

All employees of the Department of the Treasury, whether Internal Revenue Service employees or employees of any other branch of the Department, are barred from receiving informant’s rewards.

Unless information to the contrary is available, examiners and reviewers may rely on the informant’s statement on Form 211 to the effect that he/she was not an employee of the Department of the Treasury at the time he/she came into possession of the information or at the time he/she divulged it.

No check with the National Office as to employment status need be made.

If the information submitted by a Federal employee (other than an employee of the Department of the Treasury)came to his/her knowledge apart from his/her official duties, such Federal employee would generally be eligible for a reward to the same extent as any other informant. For example, a postman who overheard a taxpayer boasting to a customer in a store concerning his nonpayment of income taxes was allowed a reward when his information resulted in the recovery of taxes.

Unless there is a statute or ordinance specifically excluding a police officer from the acceptance of a reward, a police officer will be eligible for an informant’s reward.

The responsible Area Director will ask the State or municipality whether there is such a rule upon receipt of a claim for reward filed by a police officer.

Information furnished by informant was of no value.

Information furnished by the informant was already known to the Service or available in accessible public records.

Payment of a reward would be inappropriate; for example, when the informant participated in the evasion scheme or prepared the return for the taxpayer with knowledge that taxes were being evaded.

Informant obtained, or furnished, the information while a Department of Treasury employee.

Informant obtained the information as part of his/her official duties as an employee of any other Federal agency.

Informant obtained or furnished the information while a State officer or member of a State body or commission having access to Federal returns, copies or abstracts.

Payment would be contrary to State or local law.

Under no circumstances, however, should the results of any examinations made pursuant to the information furnished by the informant be discussed in violation of the restrictions of IRC 6103 and 7213 and related sections of law.

The informant should, of course, not be denied his/her right to look at the public record with respect to any accepted offers in compromise.

In such event he/she should be advised that claimants for reward have brought suits in the United States Court of Claims in an attempt to recover on claims filed for reward.

For example: In the cases of Abraham L. Gordon v. The United States, 92 Ct. CIs. 499, and Samuel K. Katzberg v. The United States, 93 Ct. CIs. 281,the Court dismissed each action on the ground that the Commissioner of Internal Revenue was within his/her authority in offering and paying such a sum as he/she deemed suitable.