(Bloomberg News) The Internal Revenue Service, reversing an earlier position, proposed rules making it more likely informants will collect a reward when they blow the whistle on tax-dodging employers, neighbors or family members.

The agency proposed regulations today that make it easier for whistleblowers whose information results in denial of refunds or a reduction in deductible losses to get rewards of as much as 30% of the amount involved. Earlier guidance tied reward payments to a portion of additional taxes paid as a result an informant's tip.

"These regulations are good news for whistleblowers," Iowa Senator Charles Grassley, who authored the 2006 law enhancing reward payments for informants, said in a statement.

The shift helps position the IRS to begin making large payouts for the first time under a 2006 law mandating higher rewards to whistleblowers. The new regulations were written by Heather Maloy, a top official in charge of services and enforcement who serves as a deputy to IRS Commissioner Doug Shulman.

"It's the first time IRS senior management has paid attention and looked at this program," said Dean Zerbe, a lawyer representing whistleblowers who wrote the statute when he was an aide to Grassley.

Sending a Signal

"It sends a signal up and down the lines of the IRS that 'hey, senior management likes this program and want this program to be a success,'" Zerbe said.

IRS spokesman Frank Keith said the regulations, issued in proposed form, "alters the computation of the award they're entitled to." He said the rules demonstrate "the IRS is completely and totally committed to implementing the whistleblower statute."

Congress enhanced the IRS whistleblower program in 2006 to increase rewards and mandate the agency pay more of them. Under the law, whistleblowers may collect 15% to 30% of taxes collected as a result of the information they provided. Tips, many claiming cases of fraud involving more than $2 million, have poured in since.

Tips Increase

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