I bet that every person reading this blog – people with an interest in the IRS Whistleblower Program – has seen that the IRS has been under fire this summer due to the exempt organization application processing scandal, and is wondering how this situation impacts their tax whistleblower claim or the IRS Whistleblower Program.

Caveat: I’m not a political person.  Despite having practiced tax law in Washington DC for the first dozen years of my legal career, my interest in politics is largely limited to what changes Congress is going to make to the Internal Revenue Code.  I.e., amending section 7623 in December of 2006 caught my attention!  With that said, my first reaction to the current IRS scandal wasn’t: “how could that noxious but revenue-irrelevant situation have been allowed to develop without someone asking themselves how it would look politically once it came to light.”  No, my reaction was: “uh oh, this is going to cause serious problems the next time the IRS needs something from Congress.”  How right I was.

All tax whistleblower cases, and the success of the IRS Whistleblower Program along with them, are wholly dependent on the IRS enforcing the violations of the Internal Revenue Code that we bring to their attention.  We have said from day one that the biggest risk in any whistleblower case is that the IRS will not act on your information, or they will not act with sufficient tenacity and resources to carry the case through to a successful conclusion.  In short, we’ve said the old analogy applies: “You can lead the horse to water but you can’t make him drink,” and the Cooper and Cohen cases have confirmed that analogy applies here.  If the IRS doesn’t act on your information, you get no award.

Fast forward to this summer… the IRS blunders in the total-waste-of-enforcement-resources exempt organizations area, and now it needs next fiscal year’s budget approved by Congress.  Surprise surprise, now some outraged members of Congress want to cut the IRS budget by 30%.  Never mind the fiscal stupidity of cutting the IRS budget in the first place – because it is the principal collector of the money our civilization runs on –  this cut would decimate the IRS’s ability to enforce the Code.  Whistleblower cases could simply have to be abandoned for lack of enforcement resources, e.g. because there are no agents or lawyers available to prosecute the case. 

Now, most political experts will say that this massive IRS budget cut proposal will not be accepted, and the Senate has proposed a budget that restores the funding the House of Representatives wants to slash, but it still highlights the biggest risk that we all have, that the IRS will do nothing with a whistleblower’s information.  The IRS has unfortunately shown that it is willing to ignore whistleblower cases even while the nation is running huge deficits.  The excuses why don’t really matter, although we continue to believe that some IRS officials will ultimately be held accountable for intentionally ignoring specific instances of large-scale non-compliance, what matters is that to have any chance of success in this landscape a whistleblower has to do everything they can to make their case attractive to the decision makers at the IRS.  Those officials in the IRS who decide how their scarce enforcement resources will be allocated hold your case in their hands, along with many other cases competing for those resources.  Budgets that make those enforcement resources even more scarce are a huge threat to a whistleblower case.  Helping them pick your case in spite of that scarcity is what we continue to strive to do. 

  • Bubba Shawn

    Scott:

    Two of the three IRS senior executives responsible for blocking, limiting and delaying IRS whistleblower awards are gone (Douglas Shulman and Steven Miller). The third, IRS Chief Counsel Mr. Wilkins, has been discredited and is subject to Congressional investigation and a law suit based upon the APA. As you know, the IRS Chief Counsel Office has taken the lead to punish IRS whistleblowers with dictates, rules and hostile Tax Court motions. The smart money is betting that Mr. Wilkins will resign, just as Mr. Miller did, before the next House Oversight Committee hearing on the Tea Party scandal.

    That is very good news for IRS whistleblowers that are languishing in “suspended” status awaiting determinations. IRS whistleblowers who are waiting for examinations to start will become collateral casualties in the ongoing Congressional war against the IRS.

  • Roy J. Meidinger

    The elephant in the room is not the question of paying a reward but why President Obama and the IRS do not want to fix the problem, tax the Healthcare Industry but instead want to cover it up and let it continue??????????
    When Congress created the IRS Whistleblower Law it included a provision saying the Whistleblower did not have to have a contract with the IRS Whistleblower Office to collect a reward.

    IRS Whistleblower Law
    As amended by PL 109-432
    26 USC § 7623
    (6) Additional rules.
    (A) No contract necessary. No contract with the Internal Revenue Service is necessary for any individual to receive an award under this subsection.

    Please Read:

    The IRS says it is not going to collect the taxes due from the health care industry because the Whistleblower has no contract with the Whistleblower Office.

    The IRS has not denied the tax issues, which means they admit the Healthcare Industry is evading taxes, but it is too big to tax.

    Instead of fixing Healthcare Industry President Obama is hiding truth.

    The biggest scandal President Obama has to face will disclosed in Tax Court, docket No. 016513-12. It involves Trillions of Dollars paid in kickbacks to the Health Insurance Companies.

    The Tax Court has Ordered the IRS to reply to charges by July 24th, 2013. Read exhibits for full understanding of charges.

    Roy J. Meidinger
    239-694-5597

  • Bubba Shawn

    Scott,

    How do you and your colleagues assess the threat to whistleblowers that Ms. Debra Bowe, from the Chief Counsel Office, is reported to be the Special Counsel to Director Whitlock?

  • Lest anyone forget, a whistleblower award determination is an adverse proceeding. That means that the IRS has its lawyers who will zealously pursue the IRS’ legal positions, and a whistleblower must be ready to protect their rights and zealously pursue their legal positions. While a whistleblower can be hopeful that their award determination process is not a contentious one they should not forget that it is an adversarial process by its very nature, obviously at the judicial appeal level, but also at the administrative appeal level.