whistleblower

Case Study The Tax Relief and Health Care Act of 2006 established an IRS Whistleblower Office that administers a program to uncover tax cheating and oversee appropriate rewards to whistleblowers who substantially contribute to uncovering violations of the tax laws. Violations include deliberately underreporting or omitting income, overstating deductions, maintaining multiple sets of books, hiding assets or income, and claiming personal expenses as business expenses. The new whistleblower law was aimed at uncovering significant violations involving tax fraud or underpayments of over $2 million (including tax, penalties, and interest). Individual tax cheats must have an annual taxable income exceeding $200,000 in order for a whistleblower to qualify for a reward under the law. Rewards vary from 15% to 30% of the amount the IRS collects as a result of information provided by the whistleblower. A tip that is not the original source of information is subject to a smaller reward. The IRS does not pay potential rewards of $100 or less, and payments will not be approved until a case is complete and the IRS has collected the taxes and penalties it is due. A less ambitious IRS whistleblower law paid cumulative rewards of under $30 million in the five years prior to 2006. According to the IRS, only 8% of claims filed under the previous law had resulted in reward payments.