Whistleblowers have always paid taxes on their reward money. But over the past two years the Department of Justice has recommended the IRS count as part of whistleblowers' income the share of lawsuit settlement money that goes to whistleblowers' attorneys. This could result in whistleblowers paying back to the government anywhere from 60 percent to over 100 percent of the actual money they receive. Also, their attorneys also pay tax on the fees received and that amounts to the same money being taxed twice. If this is allowed, it will discourage individuals from reporting fraud and risking their careers and their families.
Whistleblowers face severe retaliation from their employers.
This potentially disastrous tax problem will result in fewer cases being reported. We will be the loser. We stand to lose potentially hundreds of millions of dollars, maybe even billions, annually to contractor frauds which will go unreported. As chairman of the Senate Finance Committee, Sen. Grassley can introduce and push through an amendment to the Internal Revenue Code that would solve this problem. He should do that and put the teeth back into the False Claims Act.