The IRS will pay money to people who blow the whistle on persons who fail to pay the tax that they owe. If the IRS uses information provided by the whistleblower, the IRS can award the whistleblower up to 30 percent of the additional tax, penalty and other amounts it collects.

The IRS may pay awards to people who provide specific and credible information to the IRS if the information results in the collection of taxes, penalties, interest or other amounts from the noncompliant taxpayer. The IRS is looking for solid information, not an “educated guess” or unsupported speculation. The IRS is also looking for a significant Federal tax issue - this is not a program for resolving personal problems or disputes about a business relationship.

The reward program is not new. In fact, what is now 26 U.S.C. §76239(a) has been on the government’s books since March 1867, which allowed the Secretary of the Treasury to pay such amounts as he deems necessary “for detecting and bringing to trial and punishment persons guilty of violating the internal revenue laws or conniving at the same.”

The law provides for two types of awards. 1) If the taxes, penalties, interest and other amounts in dispute exceed $2 million, and a few other qualifications are met, the IRS will pay 15 percent to 30 percent of the amount collected; 2) generally those who do not meet the dollar thresholds of $2 million in dispute the award through this second program are less, with a maximum award of 15 percent. An informant wishing to submit information and seek an award must use IRS Form 211.

Mere submittal of the Form 211 will not trigger an award to the informant. To earn any award, the information must lead to judicial or administrative action – an audit or investigation resulting in the collection of proceeds. The process, from submission of complete information to the IRS until the proceeds are collected, may take several years. Payments of awards will not be made until after the taxes, penalties, interest, additions to tax and additional amounts that are finally determined to be owed to the Service and have been collected.

Prior to issuing an award check, the IRS will verify the informant's mailing address. The reason for this is that all awards will be subject to current federal tax reporting and withholding requirements. The whistleblower will receive a Form 1099 from the IRS.

Please note that the above is a summary of the IRS whistleblower program. Our firm has helped numerous taxpayers resolve their federal and state tax liabilities.