What is the IRS Whistleblower Reward Program?

Since 1867, the Department of the Treasury has had the power to pay monies to taxpayers “for detecting and bringing to trial and punishment persons guilty of violating the internal revenue laws or conniving at the same.” However, it wasn’t until December 2006, through the Tax Relief and Health Care Act of 2006, that critical changes to the law came to fruition.

The addition of a new section to the tax code, IRC Section 7623(b), implemented a critical change that no longer allowed rewards to be discretionary for taxpayers who brought in critical information that led to collected proceeds. Today, if the IRS uses the information brought forward by a taxpayer, and proceeds are eventually collected, then under the new law the whistleblower shall receive 15 to 30 percent of collected proceeds as a rewards.

The Tax Relief and Health Care Act of 2006 created the actual IRS Whistleblower Program, and the office that oversees the program. The law also created appeal rights for taxpayers, who have the ability to petition the U.S. Tax Court should they disagree with the determination made by the IRS Whistleblower Office regarding their claim. The changes brought on by the Tax Relief and Health Care Act of 2006 were significant steps forward for tax whistleblowers, however there are many more improvements that could be made in the future.

Taxpayers who have credible information regarding tax fraud should seek counsel when considering whether or not to file a Form 211, Application for Award for Original Information, with the IRS Whistleblower Office.