IRS Whistleblower Program: How Rewards Work

The IRS Whistleblower Office was established by the Tax Relief and Health Care Act of 2006. This office is tasked with processing tips from individuals, such as whistleblowers, who have knowledge of significant tax noncompliance to provide that information to the IRS.

A principal reason for enacting the law is that Congress recognized that detecting tax evasion and tax fraud is very difficult for the government to detect due to their complexity and the lack of resources to audit or investigate all returns.

The office pays monetary awards to individuals whose information is used by the IRS. The percentage of the award falls between 15 and 30% of the proceeds collected and linked to the whistleblower’s information. The percentage a whistleblower receives mary vary, depending on various award factors.

As a result of enacting a robust tax whistleblower law, the IRS receives reports of serious tax fraud from whistleblowers, many of whom have inside knowledge of the complex financial transactions and other illegal conduct that results in tax fraud.

Whistleblowers often provide extensive documentation to support their claims that would not have been otherwise known to the IRS.

The IRS calls this an award — many people search for it as a whistleblower reward. They refer to the same payment

Individuals who provide information leading to the collection of taxes may receive an award (sometimes called a reward) of 15 and 30% of the collected proceeds. To become eligible, the tax non-compliance must first meet the following criteria:

• Taxpayer Income: The taxpayer’s gross income must exceed $200,000.
• Amount in Dispute: The amount of taxes in dispute must exceed $2 million.

In referring to awards, the IRS may use the term proceeds, which refers to penalties, interest, taxes, and any other amounts collected due to the IRS’s enforcement of tax laws, including criminal fines, civil forfeitures, and violations of reporting requirements.

There is no contract required to receive a whistleblower reward from the IRS. It’s advised that whistleblowers obtain legal representation, as the whistleblowing and award process is complex. Failure to meet any the requirements may result in your case being denied or dismissed.

Reduced Awards

If the information provided is based on publicly available sources, which is considered “less substantial,” the award may be reduced to an award of no more than 10% of the proceeds collected as a result of the action, related actions, or settlements.

No Award

It is also possible for a whistleblower to be ineligible for an award if they were involved in planning or initiating tax evasion. In fact, these whistleblowers may actually face criminal charges.

Related Actions

Additional compensation may also be available if a whistleblowers initial information leads to continued investigations or legal actions that lead to tax collection. This is most common if the information triggers a broader investigation that uncovers subsequent tax evasion or fraud.

Remedies

Employees who win a retaliation case my be entitled to full compenation, including damages, such as back pay, full benefits, and interest. They can also recover costs like attorney fees or witness fees. In summary: if they are relatiated against, they are entitled to a full range of remediesto make them whole, and they cannot wave the right under this law.

IRS Whistleblower Awards Paid Since Inception

Since issuing the first award in 2007, the IRS Whistleblower Office has collected over $7.5 billion from non-compliant taxpayers, and have paid awards totaling over $1.3 billion. Whistleblowers play a vital role in bolstering the fair and effective enforcement of nation’s tax laws.

Employers are prohibited from retaliating against employees for reporting any sort of tax non-compliance, fraud, or other violations, or assisting the IRS in an investigation. This means they may not discharge, demote, suspend, threaten, harass, or in any other manner discriminate against an employee in the terms and conditions of employment for doing what’s legally right.

Employees who experience relaliation can file a complaint with the Secretary of Labor or sue in federal court, but only if the Secretary of Labor fails to act within 180 days. There are specific procedures and rules outlined in other federal laws with these cases. It’s important for employees to know that they have 180 days to file a complaint from the date in which the retaliation started. In cases that go to court, employees have the right to a jury trial.

Anonymous Tips

The IRS does not allow for anonymous whistleblowing. However, they do vow to maintain strict confidentiality throughout the process.

Still, there are ways submit a tip without revealing your identity. This includes hiring a whistleblower lawyer who can file a whistleblower tip on your behalf, and act as an intermediary between you, the IRS and courts. A whistleblower attorney also has a solid understanding of the law and will protect your identity to the extent possible under law—if you experience retaliation, a whistleblower attorney can help you file a complaint immediately.

There are two forms for reporting tax fraud to the IRS. Form 3949-A is a general tip that can be filed anonymously but does not qualify you for an award. Form 211 is the formal whistleblower claim that makes you eligible for 15–30% of collected proceeds but requires your identity. See the full breakdown of Form 3949-A vs. Form 211