U.S. tax authorities are investigating about 4,500 potential big-money tax cheats using tips from whistleblowers, a government official said on Tuesday.

The number of informants reporting suspected tax evaders has jumped dramatically, after a December 2006 law boosted rewards for those sharing key information on cases involving evasion of $2 million and more, and made awards mandatory.

The Internal Revenue Service's whistleblower office, created under the law, is getting about 40 to 50 tips a month on potential tax cheats in that category, the head of the office told an offshore finance conference.

That is consistent with the big spike in tips seen beginning in fiscal 2008, with the law's implementation, said Steve Whitlock, director of the IRS whistleblower office.

The new guarantee of a minimum reward of 15 percent for cases found to prove cheating of above $2 million has been a key incentive in jump starting the program, Whitlock said.

The fax machine was running the next day, he said. There were significant numbers of claims involving potential cheats over $100 million.

The cases above $2 million tend to involve business deals in some way, from partnerships to corporations, he said.

Previously, the IRS set reward amounts ranging from 1 percent to 15 percent of money recovered. Under the new law, the IRS will pay at least 15 percent but no more than 30 pct.

However, the government has yet to pay a whistleblower under the new law. Whitlock it takes five to seven years for a claim to go through the system -- if all the stars align.

Whitlock said there are several cases ripe for a decision, but he declined to be more specific.

The law is broadly supported, but critics say some informants have not been treated well.

Bradley Birkenfeld, a former UBS AG banker who provided the U.S. government with key details to win a $780 million settlement against UBS, is now in jail for helping his own client evade taxes, despite his cooperation and government pleas for a reduced sentence.

His claim is still being considered by the IRS, which says it cannot comment on individual cases.

Officials in Germany and France have made headlines by saying they would buy bank data from whistleblowers on tax evaders in their countries.

Whitlock said the IRS would not consider such an offer.

We don't pay in advance, Whitlock said. The IRS does not buy information from people and see what it's worth.

(Reporting by Kim Dixon; Editing by Tim Dobbyn)

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