IRS Whistleblower Reward Program: How 26 U.S.C. § 7623 Works

The IRS whistleblower reward program, established under 26 U.S.C. § 7623, allows individuals who report underpayments of tax or violations of the internal revenue laws to receive a financial award when the government collects proceeds as a result of the information provided. The statute creates both a discretionary award tier and a mandatory award tier, depending on the size of the disputed proceeds and the nature of the whistleblower’s contribution. No specific outcome can be assured in any individual case, and the amount of any award will depend on the facts and circumstances of each matter.

Understanding how the program is structured — who may submit information, what thresholds must be met, and what protections exist for those who come forward — can help a person with knowledge of significant tax misconduct evaluate whether reporting may be appropriate for their situation.

How the IRS Whistleblower Reward Program Works

Under 26 U.S.C. § 7623, the Secretary of the Treasury is authorized to pay awards to individuals who bring information about underpayments of tax or violations of the internal revenue laws to the government’s attention. When the statutory thresholds are met and the government proceeds with an action based on that information, an award is mandatory rather than discretionary. The statute sets out specific eligibility rules, award percentage ranges, and conditions that may reduce or eliminate an award.

The Statutory Basis: 26 U.S.C. § 7623

Under 26 U.S.C. § 7623, the Secretary of the Treasury is authorized to pay awards to individuals who bring information about underpayments of tax or violations of the internal revenue laws to the government’s attention. Any individual may submit information; no contract with the Internal Revenue Service is necessary to be eligible for an award. The individual may be represented by counsel. No award may be made based on information submitted to the Secretary unless that information is submitted under penalty of perjury.

When a Mandatory Award Applies

The mandatory award tier under 26 U.S.C. § 7623(b) is triggered only when two threshold conditions are both met: the proceeds in dispute exceed $2,000,000, and — in cases involving an individual taxpayer — that individual’s gross income exceeds $200,000 for at least one taxable year subject to the action. When both thresholds are satisfied and the Secretary proceeds with any administrative or judicial action based on the whistleblower’s information, the award is mandatory, not discretionary. Every False Claims Act matter is different; results depend on the specific facts of each case, and no similar outcome is implied.

What “Proceeds” Includes

The statute defines “proceeds” broadly. Under 26 U.S.C. § 7623(c), the term includes penalties, interest, additions to tax, and additional amounts provided under the internal revenue laws, as well as any proceeds arising from laws the Internal Revenue Service is authorized to administer, enforce, or investigate — including criminal fines, civil forfeitures, and proceeds from violations of reporting requirements. The award base is therefore not limited to the underlying unpaid tax alone.

Award Percentage Range: What Reporters May Receive

Under 26 U.S.C. § 7623(b), the award percentage a whistleblower may receive depends on the extent of their contribution and whether the action was based principally on information already in the public domain. The statute establishes two tiers — a substantial-contribution range of at least 15 percent but not more than 30 percent, and a lesser-contribution ceiling of not more than 10 percent — along with circumstances under which an award may be reduced or denied entirely.

Substantial-Contribution Awards: 15–30 Percent

If the Secretary proceeds with an administrative or judicial action based on information brought to the Secretary’s attention by an individual, that individual shall, subject to the conditions in the statute, receive as an award at least 15 percent but not more than 30 percent of the proceeds collected as a result of the action, including any related actions, or from any settlement in response to such action. The determination of the amount of the award by the Whistleblower Office shall depend upon the extent to which the individual substantially contributed to such action.

Lesser-Contribution Awards: Up to 10 Percent

If the action is one which the Whistleblower Office determines to be based principally on disclosures of specific allegations resulting from a judicial or administrative hearing, a governmental report, hearing, audit, or investigation, or from the news media — and the whistleblower was not the original source of that information — the Whistleblower Office may award up to 10 percent of the proceeds collected as a result of the action, taking into account the significance of the individual’s information and the role of the individual and any legal representative in contributing to the action.

Reduction or Denial of an Award

Under 26 U.S.C. § 7623(b)(3), if the Whistleblower Office determines that the claimant planned and initiated the actions that led to the underpayment of tax or the conduct at issue, the award may be appropriately reduced. If that individual is subsequently convicted of criminal conduct arising from that role, the Whistleblower Office shall deny any award. Any determination regarding an award may, within 30 days of such determination, be appealed to the Tax Court.

Who Should Consider Reporting Under the IRS Whistleblower Reward Program

Because the mandatory award tier under 26 U.S.C. § 7623(b) applies only when disputed proceeds exceed $2,000,000, this program is most relevant to individuals with knowledge of large-scale tax misconduct. Someone working inside a company, accounting firm, financial institution, or any organization that handles significant sums may be positioned to observe conduct that could qualify as reportable under the statute. Every False Claims Act matter is different; results depend on the specific facts of each case, and no similar outcome is implied.

Types of Conduct That May Qualify

The statute’s own language describes the conduct that may be reportable. Under 26 U.S.C. § 7623(d)(1), protected reporting includes providing information or assistance regarding underpayment of tax or any conduct which the employee reasonably believes constitutes a violation of the internal revenue laws or any provision of federal law relating to tax fraud. Reportable conduct may also include violations of reporting requirements, as that term is used in the statute’s definition of proceeds.

• Deliberate or systematic underpayments of tax
• Conduct the employee reasonably believes constitutes a violation of the internal revenue laws
• Conduct the employee reasonably believes constitutes a violation of any provision of federal law relating to tax fraud
• Violations of reporting requirements

Why the $2 Million Threshold Matters

Because the mandatory award tier applies only when disputed proceeds exceed $2,000,000, this program is particularly relevant to individuals with knowledge of large-scale tax misconduct — the kind that may occur in corporate, partnership, or high-net-worth individual contexts. Attorneys who handle these matters can help a potential whistleblower evaluate whether their information may meet the statutory thresholds and how to submit information as required. To learn more about how this program relates to other whistleblower frameworks, visit our qui tam and whistleblower practice area. Every False Claims Act matter is different; results depend on the specific facts of each case, and no similar outcome is implied.

Anti-Retaliation Protections Under 26 U.S.C. § 7623(d)

Under 26 U.S.C. § 7623(d), no employer, or any officer, employee, contractor, subcontractor, or agent of such employer, may discharge, demote, suspend, threaten, harass, or in any other manner discriminate against an employee in the terms and conditions of employment in reprisal for any lawful act done by the employee to report or assist in an investigation of tax underpayments or violations. An employee who experiences retaliation may file a complaint with the Secretary of Labor within 180 days of the violation, or — if the Secretary of Labor has not issued a final decision within 180 days and the delay is not due to the claimant’s bad faith — may bring a civil action in the appropriate federal district court, where a party is entitled to trial by jury.

Remedies for Retaliation

An employee who prevails in a retaliation action under 26 U.S.C. § 7623(d)(3) shall be entitled to all relief necessary to make the employee whole, including: reinstatement with the same seniority status the employee would have had but for the reprisal; the sum of 200 percent of the amount of back pay and 100 percent of all lost benefits, with interest; and compensation for any special damages sustained as a result of the reprisal, including litigation costs, expert witness fees, and reasonable attorney fees.

Anti-Waiver and Arbitration Provisions

The rights and remedies provided under 26 U.S.C. § 7623(d)(5) may not be waived by any agreement, policy form, or condition of employment, including by a predispute arbitration agreement. No predispute arbitration agreement shall be valid or enforceable if the agreement requires arbitration of a dispute arising under this subsection.

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Frequently Asked Questions

Who can submit information under the IRS whistleblower reward program?

Under 26 U.S.C. § 7623(b)(6), any individual may submit information, no contract with the Internal Revenue Service is necessary to be eligible for an award, and the individual may be represented by counsel. All information must be submitted under penalty of perjury. There is no requirement that the individual be a current or former employee of the taxpayer being reported.

What award percentage might a whistleblower receive?

Under 26 U.S.C. § 7623(b)(1), a whistleblower who substantially contributed to the action may receive at least 15 percent but not more than 30 percent of the proceeds collected. If the action was based principally on information already in the public domain and the whistleblower was not the original source, the award may be up to 10 percent. The amount of any award will depend on the facts of each case, and no specific outcome can be assured.

What protections exist if an employer retaliates against a whistleblower?

Under 26 U.S.C. § 7623(d)(1), employers and their officers, employees, contractors, subcontractors, and agents are prohibited from discharging, demoting, suspending, threatening, harassing, or otherwise discriminating against an employee in reprisal for protected reporting activity. A retaliation complaint may be filed with the Secretary of Labor within 180 days of the violation, and available remedies may include reinstatement, 200 percent of back pay plus 100 percent of lost benefits with interest, and reasonable attorney fees.