New Whistleblower Law Generating Very Large Claims

For many years the IRS has had the legal authority to award money to whistleblowers who provide information resulting in the collection of underpaid taxes. However, in the past, the IRS had complete discretion over the awards and did not effectively administer the process. As a result, the old program—if one could call it a program—generally did not result in significant awards and did not draw much attention from taxpayers or practitioners. All of that changed on Dec. 20, 2006, with the passage of the Tax Relief and Health Care Act of 2006. The Act creates a special Whistleblower Office within the IRS to administer claims and requires the IRS to make a whistleblower award—under certain circumstances—of at least 15 percent and up to 30 percent of the underpaid taxes, penalties and interest the IRS ultimately collects through administrative or judicial action it takes based on information provided by a whistleblower.