Senator Ron Wyden, the current chairman of the Senate Finance Committee, and Senator Chuck Grassley, the former chairman, jointly wrote an article in Politico discussing an important issue to us, the prioritization of whistleblower claims by the IRS.  They said:

[W]e’ve been puzzled why the IRS often snubs whistleblowers who may provide invaluable evidence of wrongdoing, especially when the costs of inaction are only growing. Taxpayers who underpay what is legally owed are shifting the burden to others. And despite efforts by the IRS to narrow the tax gap, noncompliance looms large. IRS commissioners have routinely come to Congress asking for more money for the agency in the face of a $450 billion annual tax gap — the difference between taxes owed and taxes paid. So when Congress writes a legislative prescription to ramp up its whistleblower program, the IRS needs to prioritize programs to follow whistleblower leads.

This is the first time I’ve seen a specific call by Congress for the IRS to prioritize whistleblower claims when they select cases for enforcement action.  We couldn’t agree with these Senators more.  According to a June 2006 report by the Treasury Inspector General for Tax Administration (“TIGTA”), IRS examinations initiated based on whistleblower information are more effective and efficient than examinations initiated using the IRS’s primary method for selecting returns for examination.  It’s high time the IRS recognized this dollars & cents fact and used it to their advantage when deciding which non-compliant taxpayers they should go after.

  • Bubba Shawn

    Additionally, the IRS should use closing agreements, IRS form 906, in every whistleblower case. The IRS WO would also do well employing the new IRS Risk Manager Office by using their expertise assessing the risk of tax cheats appealing for a refund in Tax Court. Those appeals are a small portion of all IRS whistleblower claims. So that two year delay is completely unnecessary for the vast majority of whistleblower cases.

    IRS WO staff should not lie to whistleblowers seeking information about their claims.

    Hopefully, Senator Grassley’s Whistleblower caucus includes Senator Wyden and others. We could use all the help we can get from politicians.

  • myheadhurtz

    Signing a form 906 won’t do any good. The taxpayer would need to sign a form 866. I know of a claim where the 906 was signed on issues related to the whistle blower submission, but since an 866 wasn’t signed, the IRS is still waiting for the two years to expire.

  • Disappointed Whistleblower

    Yes, there is no question that the OCC has intentionally held up reviews and as a result, the statute of limitations has lapsed in many cases. There will be great political and media pressure on the IRS to agressively pursue Whistleblowers tips. I have no doubt that will eventually occur. However, when it comes to payment the current regulations have created a license to steal by requiring the tip to substantially contribute to the collection of proceeds. This is a blantant misreading of the statute and the intent of Congress. The statute simply requires payment if the IRS uses the information to collect proceeds. The substantial contribution test is related to the award percentage between 15-30%. There should be no free lunch! If the IRS takes the affirmative step to use the information they are required to pay. Unfortunately, they will continue use Whistleblower information and refuse to pay. You will continue to see a few award payments and tips being “worked” for years only to receive a denial letter that your tip did not [subtantially] contribute to the collection of proceeds. There needs to be a lawsuit in Federal Court challenging the IRS’s interpretation of the statute. Otherwise we will continue to see an abysmal ratio of payments versus tips. Which will eventually make their case to kill the program. Scott do you have any thoughts on how to resolve this issue?

  • Bubba Shawn

    The elections results that took place yesterday will have a profound and beneficial effect upon whistleblowers compounding the fact that we finally have an IRS Commissioner who likes us whistleblowers. Just announcing the delegation of award determinations to WO Supervisors is a huge positive decision by Commissioner Koskinen that eliminates an award bottle neck that we were not aware of.

    Another huge and positive commitment from Commissioner Koskinen is that he wants to work with the Congress on badly needed legislative changes to the statue that IRS whistleblowers have been crying out for years to no avail. Hopefully, The Commissioner made additional decisions in getting us paid more and sooner.

    Too bad for us that he signed on to the final rules as they are currently written.

  • There are already cases docketed in US Tax Court which will test what the “proceeds … based on” language of section 7623(b) means.

  • If someone wishes to bring a suit using the FTCA as legal basis I don’t think they would need it to be a “class action” to do so.

  • Bubba Shawn

    Thanks Scott,

    Lets hope those cases are ruled on the whistleblower’s side soon.

    Have you detected a change in attitude toward whistleblowers in Tax Court and the WO?