What does the IRS pay whistleblowers to report tax violations?

A whistleblower can report to the IRS any underpayment of tax – even an unintentional underpayment – or any violation of federal tax law. Violations of federal tax law include tax evasion, failure to file tax returns, false reporting to the IRS, underreporting income, and improper claims of deductions or credits, among other conduct.

The IRS publishes a list of “Recognized Abusive and Listed Transactions” that identifies 34 transactions as problematic. Those transactions take many different forms, but a common theme is that they lack “economic substance.” That generally means that they result in the transfer of money, but do not have a business purpose that is independent of the tax advantages they create.

Because whistleblower awards are given as a percentage of the amount the government recovers, large whistleblower awards often involve large tax avoidance schemes by corporations or high net worth individuals. In 2012, a whistleblower received a $104 million award for reporting tax evasion at a Swiss bank by wealthy U.S. citizens.

To qualify for an award, whistleblowers must provide specific and credible information. Any award may be reduced if the whistleblower’s information came from public sources or if the whistleblower planned and initiated actions that led to the underpayment or violation of federal tax law.

To learn more about the IRS’s whistleblower program and other programs, go to www.mololamken.com and follow us on LinkedIn. “Brilliant lawyers with courtroom savvy” — Benchmark Litigation. Copyright MoloLamken LLP 2025.