4 FAQs on the IRS whistleblower program

Whistleblowers who inform the IRS about noncompliant tax behavior by others are eligible for financial awards in certain circumstances.

In most cases, the taxpayer in question is the whistleblower’s employer. The IRS operates a program that makes the awards.

In this post, we’ll address common questions about the program.

What types of whistleblower awards are available?

There are two types of whistleblower awards, with statutory authorization in Internal Revenue Code Section 7263.

If the information from the whistleblower leads to the collection of more than $2 million in taxes, the whistleblower can get between 15 and 30 percent of what the IRS collects.

If the amount in dispute is less than $2 million, or involves an individual taxpayer with an annual gross income below $200,000, the maximum award is 15 percent.

How solid does the information supplied have to be for a whistleblower to get an award?

The information must be substantial. It can’t be mere guesswork, speculation or innuendo. And it must lead to the collection of previously unpaid taxes.

Having documentation to support allegations is very helpful, to be credible in making a whistleblower claim.

How much money did the IRS pay out last year?

The IRS issues an annual report on its whistleblower program. This month, it released the report for Fiscal Year 2018.

The report showed a big increase in whistleblower awards. The amount increased $312 million in FY 2018 – ten times as much as in FY 2017.

The amount collected by the IRS under the program was a whopping $1.44 billion.

Are whistleblowers who work for companies required to try to resolve the matter internally before making a whistleblower report?

No.

It should also be said that, in many cases, internal mechanisms within companies have broken down. In that setting, the whistleblower program can provide a way to shine a light on a glaring compliance issue. 
And as the recent report showed, the potential financial incentives for those willing to risk becoming a whistleblower are definitely there.