Form 990 asks nonprofit organizations if they have a whistleblower policy. It’s fairly easy to recognize that this is the IRS’s way of strongly suggesting this practice. Another way they have encouraged it is to give 22% – 30% of the proceeds of what the IRS collects on a case to the whistleblower him/herself.
The 2006 Tax Relief and Health Care Act also addressed whistleblower incentives and created a policy for rewarding anyone reporting information about tax underpayments exceeding $2 million. The information provided must materially lead to the recovery of taxes, penalties and interest and must be addressing entities or individuals with more than $200,000 gross income.
The first payout just occurred with the IRS paying an unidentified CPA $4.5 million after discovering and blowing the whistle on $20 million in underreported taxes. The law firm representing the unidentified CPA has created a stand alone website specifically for the case with more detailed information.