IRS Whistleblower Law: Passage of the Tax Relief and Health Care Act of 2006
The Tax Relief and Health Care Act of 2006, 26 USC § 7623 provides a robust rewards program for individuals who have knowledge of and provide information about violations of the tax laws to the IRS. In order to qualify for a reward, the whistleblower must provide information about tax fraud exceeding $2 million, and, if the whistleblower is making allegations against an individual, the individual’s annual salary must exceed $200,000. If these conditions are met, Section 7623 establishes a reward of 15-30% of the total amount collected by the IRS in administrative or judicial actions based upon the whistleblower’s information and allows for lesser awards in other specified circumstances.
The law also created a Whistleblower Office within the IRS dedicated to working with whistleblowers and administering the reward program. Previously, the IRS had a hotline and did offer rewards, but the process was reputed to be arbitrary and the rewards were few in number and limited to only 1% to 15% of the tax and penalties collected as a result of the whistleblower’s tip. The Whistleblower Office is designed to be more predictable and responsive so that it can help narrow the gap between the amount of taxes owed by the public and the amount of taxes paid to the government each year, which is estimated by the IRS to be $345 billion.
On February 2, 2007, the IRS named Stephen A. Whitlock the director of the new Whistleblower Office. Whitlock’s previous experience included serving as the as the Deputy Director of the IRS Office of Professional Responsibility and the Director of the IRS Commissioner’s Complaint Processing and Analysis Group. According to press release on the IRS website, IRS Commissioner Mark W. Everson has said that Whitlock “brings a strong background in ethics and tax issues to help get this program off to a good start,” and that, under Whitlock’s leadership, the Whistleblower Office “will meet expectations from Sen. Grassley and other supporters to run a robust program.”
