In 2006, Congress enacted a new whistleblower law that enables private individuals to report: (1) underpayments of tax; and (2) persons otherwise guilty of violating the internal revenue laws. The passage of the IRS Whistleblower Law was significant because the False Claims Act does not apply to claims made under the Internal Revenue Code.
The IRS Whistleblower Law, like the False Claims Act, rewards whistleblowers who report allegations of fraud on the government. In general, a whistleblower can receive an award of between 15% to 30% of the collected proceeds (including penalties, interest, additions to tax and additional amounts).
The IRS Whistleblower Law is, however, very different from the False Claims Act. The process and procedure for reporting fraud under the IRS Whistleblower Law are substantially different from the qui tam whistleblower provisions of the False Claims Act. For example, whistleblower reports under the IRS Whistleblower Law are not, as in False Claims Act cases, raised in a lawsuit filed in federal court and served on the Attorney General and Local United States Attorney. Instead, whistleblower reports are handled by the IRS Whistleblower Office and disputes may be appealed to the Tax Court.
There are also many substantive differences between the IRS Whistleblower Law and the False Claims Act. For example, the IRS Whistleblower Law applies, in the case of individual taxpayers, only to those individuals: (1) with a gross income above $200,000 for the relevant taxable year; and (2) when the tax, penalties, interest, additions to tax, and additional amounts in dispute exceed $2 million. The False Claim Act, by contrast, contains no such monetary thresholds.
As a result of the important substantive and procedural provisions, potential IRS whistleblowers should obtain the support of experienced legal counsel. The lawyers in our global qui tam whistleblower practice group have the unique skills and experiences needed to protect the interests of IRS whistleblowers.