The False Claims Act was designed to encourage whistleblowers to report instances of fraud against the government, providing generous rewards for those who step forward. But the FCA does not apply to tax fraud, and until six years ago, tax whistleblowers were limited in the scope of their recovery. In 2006, Congress provided protections to tax fraud whistleblowers, and the IRS opened an office in 2007 to handle reports. The response was overwhelming: The Whistleblower Office received nearly 1,000 tips involving more than 3,000 taxpayers in fiscal years 2008 and 2009. Hundreds of the allegations involved tax underpayments of more than $10 million, and dozens more of underpayments of $100 million or more.
In 2007, an accountant for a large financial services firm in a small town realized his company had underpaid taxes to the IRS – to the tune of $20 million.
He filed a complaint with the newly-established IRS Whistleblower Office, but after he hadn’t heard anything for two years, he secured competent counsel. His attorneys helped him move the case forward, and also helped him keep his identity secret. He was able to prosecute the case fully, and in 2011, the IRS sent him a reward of $4.5 million dollars. The whistleblower has kept his professional reputation intact,and continues to work as a certified accountant.