About the Law and Income Tax Fraud

The Tax Relief and Health Care Act of 2006 provides the biggest potential rewards in the history of the Internal Revenue Code to people who report IRS tax fraud. It is modeled after the successful Department of Justice's reward program, but applies specifically to tax cheats. The act established the IRS Whistleblower Office to process information received from individuals who have direct and independent knowledge of tax fraud.

The law provides monetary rewards in cases where the potential amount owed to the IRS by businesses, in combination for back taxes, penalties, interest and additions to tax, exceeds $2 million. If the tax cheat is an individual, that person's gross income for the applicable year must also exceed $200,000.

If the IRS recoups money based on information provided by a whistleblower, the law requires that the agency issue the informing party a monetary award of between 15% and 30% of the total collected by the IRS.  The law also assures the whistleblower the right to appeal these IRS rewards to the Tax Court, if necessary. This new law is substantially more generous than earlier laws, which only provided for a reward of up to 15%, at the discretion of the IRS and which provided no right of appeal.

Read the legislative text of the Tax Relief and Health Care Act of 2006.

Under the False Claims Act, anyone who reports income tax cheats who commit income tax fraud, may be entitled to IRS rewards.