IRS Whistleblower Laws, Statutes, and Policies

The IRS’s Whistleblower law, as discussed in other articles on this site, is designed to reward those whom provide information on tax evaders and other aspects of tax fraud. This article’s design is to discuss the actual statute and understanding of the law, and the policies in how it is applied.

IRS Statutes on Whistleblowing

Section 7623 authorizes the IRS Whistleblower program, allowing the IRS to pay individuals for “detecting underpayments of tax, or detecting and bringing to trial and punishment persons guilty of violating the internal revenue laws or conniving at the same.”

In its pertinent parts, the award has a general range from 15% to 30%, with some exceptions and no limit on the dollar amount of the award. There is a reduced award amount of up to 10% in cases based principally on disclosure of specific allegations resulting from events such as .

1. Judicial or administrative hearings
2. Governmental report, hearing, audit or investigation
3. An appropriate reduction if the whistleblower “planned and initiated” the non-compliance.

The key here is that program applies when amount in dispute exceeds $2 million. If the taxpayer is an individual, the individual's gross income must exceed $200,000 for any taxable year at issue in a claim. The award is given if any additional tax, penalties, interest, and other amounts are collected based on the information given.

If you don’t qualify under these requirements, the IRS can still award information given for smaller cases, but there is no requirement that they pay. If the IRS determines that the information provided was planned out and initiated by the tax evader or at the direction of the evader, no award will be given.

How Long Does it take to Recieve an Award for Whistleblowing?

The IRS provides anonymity to the whistleblower unless their testimony is required at a judicial hearing. Current studies have shown that it is taking an average of 7 ½ years from reporting the information and receiving any reward.  If you are accused of tax evading, there will be a formal notice given to you by the IRS, as well as an opportunity to address these allegations at an administrative hearing. You have the right to a lawyer at your hearings. Typically, a complete audit will begin the process to investigate.

Help from a Tax Attorney

If you’ve been falsely accused, it is important to speak with an experienced tax lawyer to understand the charges against you and develop your defense to prove your innocence. An experienced tax lawyer will help guide you in understanding what evidence you need to present, as well as help make your case that there was no willful tax evasion if any at all.

If you are a whistleblower, you should speak with a tax lawyer to understand your rights in claiming your reward, and ensure that you’ve taken the proper steps to ensure collection of your reward.