TOP DRAWER ARTICLE

Blowing the Whistle
by
HL Carpenter

Do you have solid information about tax fraud?

Revealing your knowledge to the Internal Revenue Service with the intent of making things right is known as whistleblowing – and could earn you a reward.

Rewarding tax whistleblowers goes back to the Civil War. The False Claims Act, also called the Lincoln Law, was passed by Congress in 1863 in response to war-related fraud. Whistleblowers were compensated with 50% of the money the government recovered through lawsuits.

In 1867, the Secretary of the Treasury was granted authority to pay informants “for detecting and bringing to trial and punishment persons guilty of violating the internal revenue laws or conniving at the same.”

The False Claims Act was amended in 1943 and again in 1986. The 1986 change reduced the informant’s reward to 15%-30%, and the informant received payment from the collected proceeds instead of funds appropriated by the government.

In 1996, a clause was added to the IRS informant rewards program to allow payments “for detecting underpayments of tax.”

Ten years later, the Tax Relief and Health Care Act of 2006 added another amendment to the IRS informant rewards program, giving whistleblowers appeal rights and creating a Whistleblower Office.

To receive a whistleblower award, your information must lead to an investigation or audit resulting in the collection of taxes, penalties, interest or other amounts from the person or organization you reported.

Originally published May 2009.

Last update: December 30, 2009