It’s a new day for tax whistleblowers, following Tuesday’s announcement that the Internal Revenue Service paid informant Bradley Birkenfeld, a former UBSUBS +3.53% private banker and convicted felon, a record-setting $104 million award. Experts called the announcement a watershed event, and predicted more big awards. Attorneys at the Ferraro Law Firm in Washington say they have filed whistleblower claims on more than $100 billion of tax underpayments.

One of Mr. Birkenfeld’s lawyers, Dean Zerbe of the National Whistleblowers Center, says he and his partners have claims outstanding on $25 billion. Since 2007, at least 1,635 people have filed claims involving at least 10,701 taxpayers.

Mr. Birkenfeld’s award is an inspiration to anyone thinking of turning in a tax cheat. But there are important caveats worth considering before taking the plunge.

Until recently, the whistleblower program had been under fire. Several critics, including the Government Accountability Office and Sen. Charles Grassley (R., Iowa), complained that the IRS was dragging its feet on implementing a 2006 law sponsored by Sen. Grassley that allows large awards—up to 30% of the taxes collected.

Earlier this summer, however, the agency affirmed the agency’s commitment to using whistleblower information and announced key changes.

Separately, a U.S. Tax Court judge prodded the IRS to explain why it was taking so long to rule on a whistleblower claim involving a former banker from New Jersey. According to his Tax Court petition, he is seeking an award based on information he provided the IRS about corporate tax shelters used by several giant firms, one of which led to a recovery of $425 million.

Still, there is much to consider before making a claim. Here is what you need to know.

The IRS has two separate award programs. The “large awards” program usually applies when taxes, penalties and interest exceed $2 million or, if the taxpayer is an individual, gross income exceeds $200,000. Awards run from 15% to 30% of “collected proceeds” (with certain exceptions), and there isn’t a cap on the total amount. Appeals to Tax Court are permitted. For cases not meeting these criteria, there is another program with a maximum award of 15%, often up to $10 million. Tax Court appeals aren’t permitted.

You probably need expert help. Anyone can file a whistleblower claim using IRS Form 211, but the agency prefers an organized package with a clear narrative, legal evidence and a memorandum explaining the law. “You need to make it easy for the IRS,” says Mr. Zerbe, a former aide to Sen. Grassley who worked on the large-award program and now works as a lawyer handling such cases.

In addition, the IRS won’t accept stolen or “privileged” information, such as a memo from an attorney to a client.

You don’t have to be squeaky clean. The IRS can disqualify whistleblowers who “planned and initiated” tax evasion, but not others who only participated in it.

A case in point is Mr. Birkenfeld. After he withheld information about a wealthy UBS client, he was convicted of conspiring to defraud the U.S. and given a 40-month sentence, which he still is serving.

Both prosecutors and the IRS said, however, that without his cooperation the massive UBS fraud might not have been uncovered.

Don’t count on getting many status updates. Experts say resolving a whistleblower case can take from four to seven years or longer, and during much of that time their clients don’t hear from the IRS. Meanwhile, tax whistleblowers don’t get the same legal protection from retaliation that other corporate whistleblowers enjoy.

Prepare to pay large taxes and legal fees. Whistleblower awards are fully taxable and subject to withholding. Mr. Birkenfeld’s lawyers won’t disclose their fees, but experts say they typically range from 15% to 40% of the pretax award, with the norm about 30%.

The whistleblower gets a full “above the line” deduction for legal fees, so the $104 million isn’t subject to double taxation. After taxes and fees, then, Mr. Birkenfeld’s net award of $104 million may be about $45 million.

Just be warned: Individual results may vary.