Today the United States Government Accountability Office (“GAO”) released a report on the IRS Whistleblower Office titled “IRS WHISTLBLOWER PROGRAM – Billions Collected, but Timeliness and Communication Concerns May Discourage Whistleblowers” for which we were interviewed last year.  Communication with whistleblowers is certainly an issue with the program almost by default due to the taxpayer information confidentiality requirements imposed on the IRS by section 6103 of the Internal Revenue Code, and the report does hit a few hot button topics including some issues with timeliness of awards and the processing of submissions, but as with any report there were fertile grounds for improvement that were not covered.

The GAO Report describes more than $315 million of awards paid between October 1, 2010 and June 30, 2015 on $1.882 billion of collected proceeds, which shows that the program has been successful in raising more revenue for the government.  However, the reported statistics of claims denied does not show just how much additional revenue the IRS is leaving on the table by not bringing enforcement actions on more whistleblower claims.  It also shows as we already know that the IRS is paying out the required award percentages (between 15 and 30%) to whistleblowers on those collected proceeds, notwithstanding the effects of sequestration.   We believe though that the IRS should reconsider its award determination process of starting from the bottom of the 15-30 percent range and working their way up, and instead use the middle of the range as the starting point and vary from that number based on the positive or negative factors of a whistleblower’s contribution in each case.  The IRS is apparently worried about consistency in applying award percentages to whistleblowers with high-dollar claims in the future because they expect the volume of those cases to be increasing, which is at least a hint at some good news in the future.

Because the IRS does not track the expiration of the period of limitations on refunds in every whistleblower case that resulted in the payment of additional tax, the IRS is setting itself up to fail to properly pay out awards in a timely fashion.  Let’s hope the GAO follow up Action Items pressure gets the IRS to utilize their E-TRAK system to better monitor this critical data so that in the future claims are paid out on a more timely basis.

  • FCA Aficionado

    People who put their careers, family’s well-being and lives on the line are being shafted by this program.

    The incompetence and malfeasance endemic in the past WBO Director and his counsel lies somewhere between machivellian and criminal.

    It’s past time for 7623 to be overhauled to remove most of the discretionary power which allows the IRS to ignore, deny and abuse the tips and the WB’s that bring them, as well as to frustrate and constrain the policy goals of the 7623 legislation.

    I’ve previously outlined some suggestions elsewhere on this site, but would suggest these here again:
    – make a 6103n agreement part of the submission process, thus opening up channels of communication during debrief, investigation through to award payout;
    – pay on Titles 18 & 31 in addition to Title 26;
    – pay 30% rewards, with deductions only in special circumstances;
    – ban the sequester deduction as well as tax ability of rewards;
    – apply the above to 7623a cases, with the only discretion being whether to investigate or not, require mandatory investigation by the BU’s on 7623b cases;
    – align IRS management with the WB by allowing the service to keep a sequester-offset part of all recoveries before paying balance into treasury;
    – require all taxpayers caught as part of 7623 submissions to be named and shamed as is done with criminal tax cases. Such naming and shaming should also reduce the contortions the service goes through to protect tax cheats by aggregating data such that it makes oversight well neigh impossible;
    – require the WBO to publish a guide as to common markets of tax cheating to inform potential WB’s of what to look go and what makes a good submission (Despite the great articles by this firm and other members of the WB plaintiff’s bar, the service shouldn’t be outsourcing this by neglect.
    – for God’s sake, put a prominent link in the IRS’ homepage.