IRS Whistleblower Reward Program

The IRS estimates that the United States loses more than $450 billion per year to tax evasion. To combat tax fraud, Congress enacted legislation providing robust incentives for whistleblowers to report tax fraud. Under 26 USC § 7623(b), the IRS is required to issue an award to tax whistleblowers of 15% to 30% of proceeds collected from tax fraud or tax underpayments if:

• the whistleblower provides a tip that the IRS decides to take action on (a whistleblower cannot force the IRS to act on a tip);
• the amount in dispute (the tax underpayment, including interest and penalties) exceeds $2 million (if the taxpayer is an individual, his or her gross income must exceed $200,000 for at least one of the tax years in question); and
• the IRS collects tax underpayments resulting from the action (including any related actions).

In enacting the IRS whistleblower bounty legislation, Congress provided mandatory awards to tax whistleblowers for high-quality tips. Section 7623(b) suggests a focus on large-scale tax fraud in that Congress removed the previous cap of $10 million on IRS whistleblower awards. Thus, if a whistleblower meets the requirements above, the whistleblower may be able to receive a substantial payout.

On July 2, 2019, the Taxpayer First Act was signed into law. The law provides tax whistleblowers, among other things, significant protections against retaliation. Read more about the tax whistleblower protection law [/https://www.zuckermanlaw.com/irs-tax-fraud-whistleblower-protection-law/ here.]