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The State of the Tax Whistleblower Law

By Usman Mohammad and Ashley Morales
ABA Tax Times
June 2023

Internal Revenue Code section 7623(b) provides mandatory awards to whistleblowers who provide information to the IRS that results in the collection of additional tax, interest, penalties or fines from corporations, high net worth individuals, and other entities. The statute is designed to incentivize whistleblowers to assist the government in detecting and deterring tax fraud and tax non-compliance.

While the law has had many successes, it also faces challenges that threaten its goals. Recent amendments to the statute have strengthened its purpose, clarifying that the mandatory award provision applies to the collection of foreign bank account (FBAR) penalties, criminal fines, and civil forfeitures as a result of whistleblower information, and providing whistleblowers protection against retaliation. IRS policy protects the identity of whistleblowers, and legislation pending in Congress would enhance such protection. In addition, the standard and scope of review that the Tax Court must apply in whistleblower cases is the subject of ongoing litigation in the courts and possible change by Congress. Finally, the pace of whistleblower awards has slowed recently, and the time that whistleblowers must
wait to receive awards has increased.

Notwithstanding these challenges, the law has resulted in over $1 billion in awards to whistleblowers, and both Congress and the IRS Whistleblower Office (WBO) appear committed to ensuring the continued viability of the law as a major tool in the IRS’s arsenal for detecting and deterring tax-related wrongs.


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Published with permission from the ABA Tax Times.