The IRS pays 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 looks for solid information, not guesses or speculation.
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. If the case deals with an individual, his or her annual gross income must be more than $200,000. If the whistleblower disagrees with the outcome of the claim, he or she can appeal to the Tax Court. These rules are found at Internal Revenue Code IRC Section 7623(b) – Whistleblower Rules.
An IRS tax whistleblower claim is independent of other whistleblower claims. Reporting an SEC claim, for example, will not cause the IRS to investigate the tax issues of the company. Likewise, filing a federal or state False Claims Act qui tam action is a separate process from filing an IRS tax whistleblower claim. Sometimes, for example, where a company is publicly traded and violates tax laws, there may also be a potential claim to file before the Securities and Exchange Commission.