Sounding the Tax Alarm, to Little Applause (IRS Whistleblower Program Mishandled)

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"I have come to the conclusion that they don't want to cooperate with whistle-blowers," Mr. Grassley said in an interview, referring to the I.R.S., "because it shows they don't know how to do their job and they're embarrassed."

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In the meantime, Mr. Insinga, 63, says that being a known whistle-blower has made it impossible to find a job. He has sued the I.R.S., asking for documents that he says will prove that his help led to the recoveries.

"Under the law they have to pay 15 percent at a minimum, but they just don't want to pay it," Mr. Insinga said of the I.R.S. "They don't want to admit that these tax schemes existed for years under their nose and they were unable to do anything about it until I provided them with the smoking gun."

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Practical steps taken by the I.R.S. would either make it hard for a whistle-blower to qualify for an award or would reduce the size of a payout. Soon after the law was passed, for example, the I.R.S. took the position that a whistle-blower could not appeal if the I.R.S. denied a claim. The tax court rejected that idea, but the I.R.S. has also argued that no award should be paid when the information supplied by a whistle-blower prompts a company to pay additional taxes without a fight. It has proposed rules that would make a reward mandatory only if the whistle-blower was the sole basis for the recovery of back taxes; it has also changed the calculation for coming up with the proceeds on which awards would be based by excluding penalties paid by scofflaws.