Update on IRS's whistleblower program.

• Author: Scott, Paul D.

This issue contains an article by Paul D. Scott on the IRS's whistleblower program. After the article was completed, Congress passed the Tax Relief and Health Care Act of 2006, which directly affects the IRS's program. The Tax Executive asked Mr. Scott to prepare a summary of the legislation, which follows:

Section 406 of the Tax Relief and Health Care Act of 2006 substantially strengthens the IRS's whistleblower program, by increasing available rewards and creating a reliable enforcement mechanism for whistleblowers to collect them. Under prior rules, the maximum award generally available to whistleblowers was 15 percent of the funds recovered by the IRS (including penalties, taxes and interest). The new provision turns that 15-percent ceiling into the floor, and increases the cap to 30 percent in those cases where the IRS pursues an administrative or judicial action against a taxpayer based on information brought to its attention by the whistleblower. Moreover, although whistleblowers were unable under prior law to enforce their claims to awards (unless they had a contract with the IRS), the new legislation provides that payments to qualified...