The office of Senator Chuck Grassley (R-IA) issued a press release yesterday announcing that the Senator had received a response from IRS Commissioner John Koskinen to questions Senator Grassley had submitted to the record after a February hearing on the IRS budget.  Senator Grassley’s question is presented below in three parts with Commissioner Koskinen’s responses following each part.  

Q.  “First, the payments to whistleblowers have slowed to a trickle at best. This is whistleblowers waiting for payment where dollars have been collected and the holdup is with the IRS processing and checking the boxes for a payment. Often it is the whistleblower office waiting for someone in the field, or in senior management to move paper. I ask that that your office review all whistleblower cases pending payment and bring the Drano to unclog the holdup.”

A.  “I have discussed with the Director of the Whistleblower Office the pace of award payments under section 7623, and have verified that he has made timely processing of claims for which an award is payable a top priority. Awards cannot be paid until the relevant taxpayer audit or investigation is completed (including any appeals), proceeds are collected, and the statute of limitations for filing a refund claim has expired. When those preconditions are met, the Whistleblower Office moves as quickly as possible to notify the whistleblower of a proposed award, obtain comments on the proposal, and make an award decision. To date, the Whistleblower Office has paid 12 awards under section 7623(b). The Director estimates that six to twelve additional 7623(b) awards will be paid in FY 15.”

Q.  “Second, I again find myself frustrated with an IRS Chief Counsel office that seems to wake up every day seeking ways to undermine the whistleblower program both in the courts and the awards. I am especially concerned that chief counsel is throwing every argument it can think of against whistleblowers in tax court. It appears at times that the Chief Counsel’s office thinks its job is to come up with hyper technical arguments and seek to deny awards to whistleblowers who have risked their lives to uncover big time tax cheats. I ask that your office and the director of the whistleblower office review the chief counsel’s wasteful and 16 harmful litigation positions that undermine the whistleblower program and go directly against your support for the whistleblower program.”

A.  “With respect to your second point, the IRS Office of Chief Counsel is responsible for defending the determinations of the IRS in the U.S. Tax Court, including those of the Whistleblower Office. The Office of Chief Counsel coordinates with the Whistleblower Office in defending its determinations before the Tax Court to ensure that Chief Counsel’s litigating positions are consistent with the program’s goals as well as the statutory and regulatory framework. In most cases before the Tax Court, the record of the case is sealed to protect both whistleblower and taxpayer interests. As a result, I cannot comment on specific arguments made in defending particular Whistleblower Office determinations that are subject to an order of the Tax Court sealing the record. The positions taken by the Office of Chief Counsel support the IRS’s administration of the law.”

Q.  “Third, with tight budgets at the IRS it is all the more imperative that the IRS works with whistleblowers and their counsels on cases. The IRS criminal investigators have had great success using whistleblowers to go after banks and terrorist organizations, but the IRS civil division still hasn’t gotten the message of working with whistleblowers. I note that the IRS hasn’t been shy about paying outside law firms big money to help it in big examinations, yet ignores the possibility of harnessing whistleblowers and their lawyers who won’t cost the IRS a dime from its budget.”

A.  “The suggestion that the IRS can do more to work with whistleblowers and their counsel is one that the IRS takes seriously. In a memorandum dated August 20, 2014, the IRS’s Deputy Commissioner of Services and Enforcement reinforced previous guidance on the importance of thorough debriefing of whistleblowers during the evaluation of their submissions. After the IRS begins an investigation based on whistleblower information, section 6103 provides limited authority to interact with a whistleblower since disclosure of taxpayer information would be necessary to gather additional information while pursuing the audit or investigation.”

With respect to Commissioner Koskinen’s response to the second question above, he surely drafted his response before the recent Tax Court decision in Whistleblower 21276-13W v. Commissioner, 144 T.C. No. 15, where the IRS Office of Chief Counsel took the position that petitioners were not award eligible because they failed to submit their Forms 211 before providing information to the IRS – a position that was shot down by the Tax Court as contrary to the requirements of section 7623.  In his press release, Senator Grassley also commented on the outcome of that case stating:

“The law was intended to direct whistleblowers and the IRS to work together to catch tax cheats.  Bureaucratic barriers don’t get the job done.  The IRS should welcome whistleblowers with a red carpet instead of putting up arbitrary legal hurdles at every turn.”

  • another frustrated whistleblower

    This response is so frustrating. According the the FY 2013 report, 161 claims were in the status “Whistleblower Office – Case Suspended Payment Received, Awaiting Expiration of Statute of Limitations on Taxpayer Claim for Refund”. Yet he only expects to pay 6 to 12 claims in fiscal year 2015? What happened to the other 150 claims.

    Even more interesting, the average time these claims had been in that status was 243 days with one claim having been in that status for 828 days. So the average claim as of 3/6/2014 had been in the status for eight months. It is now 15 months later, so the average claim has now been in that status for 23 months. Something doesn’t add up – if the average is 23 months, than many of the claims have been in that status for more than two years. Since the SOL is two years, this should be clear evidence that the IRS is intentionally withholding awards.

    Is this why they won’t release the 2014 FY report? The SEC released their report in November 2014.

  • Bubba Shawn

    Commissioner Koskinen is always sticking up for the IRS employees and the Service’s policies against Congress’s criticisms and inquiries. The Commissioner’s responses to Senator Grassley’s questions are very disappointing just as the final draft of the final regulations were.

    I believe we were all hoping that Commissioner Koskinen was going to change the Chief Counsel Office’s hostile posturing and legal maneuvers in Tax Court toward IRS whistleblowers who just want to get paid. But we know now that is not going to happen. Apparently, the Chief Counsel Office deems the WO determinations as infallible and Commissioner Koskinen agrees with that in spite of the overwhelming consensus among whistleblowers just the the opposite is true. It would be nice to really have a fan in the Commissioner’s Office.

    Stubbornly punishing IRS whistleblowers with the hated two year rule on every claim, even when a tiny fraction of tax cheats exercise that right, is harmfull to all IRS whistleblowers. The IRS defends that policy citing the statutes couched within the Taxpayer’s’ Bill of Rights. IRS whistleblowers need their own Bill of Rights.

    Notice that there is no mention to the 2007, 2008, 2009 and 2010 open claims languishing within the IRS WO inventory. Not even a peep.

    The pattern of the good Senator Grassley asking the IRS Commissioner’s great questions and always receiving answers that the IRS is sticking to it’s guns has been going on now for many years. Nothing has changed except for the opportunity to help the WO make the case for higher awards. That is a big deal.

    Again, the US Senate seems pitifully helpless in forcing the IRS to adhere to Congressional intent.

  • Eric Rasmusen

    I wonder if it might be a good strategy for any whistleblower with an active claim to file suit in Tax Court every year or so alleging unlawful IRS delay in making payments. He would have no positive evidence except that his claim has remained open, but if it can be shown that the normal practice of the IRS is to unlawfully delay claims, could that be taken as enough to get past a motion to dismiss and on to discovery?

    If not, then the IRS could simply never pay any claims, even if they do use the information, and wouldn’t have to commit perjury, since they’d never deny the claim either, and the claimant’s supposed right to review by Tax Court would be vacuous.

    The main use of this would be to keep the issue before Tax Court and the IRS and to impose some cost on the IRS for refusing to communicate without being forced to.

  • Bubba Shawn

    Another frustrated whistleblower has very good points. Those claims waiting for the SOL to expire are numbers that certainly dispute Commissioner Koskinen’s assertion that the WO processes award payments as fast as they can. Adding the 90 days Director Whitlock said he takes to get the payment finalized to the two year SOL equals 820 days.

    The lag in award payments very well be caused by multiple tax cheats audited on a single F-211 claim. The IRS policy had been stated that the WO will hold back awards until all the collected proceeds on all tax cheats had been collected and the SOL had expired upon the last tax cheat’s appeal rights. Director Whitlock’s partial payment ruse was suppose to remedy that situation.

    But we all know now that was another switch and bait tactic to ward off criticisms.

    The FY 2013 Report showed 28 whistleblowers waiting for the SOL to expire. Director Whitlock is quoted by Commissioner Koskinen as paying only twelve 7623(b) awards to date. We all know of the three awards that were publicised. I know of another. Two of Scott’s clients have been paid. Seven other awards remain anonymous.

    We need to remember that we are dealing with career IRS bureaucrats. They can’t conceptualize any other world outside of the rules that they live and work under. They also can’t conceive that perhaps those rules could be possibly be simply wrong.

    They go to work everyday punching their time cards in without thinking perhaps those rules could be wrong or ill conceived. If the numbers don’t add up or the FY reports don’t get out timely, so be it. To those folks that just the way it is.

    As I said, they are IRS bureaucrats. That is who we are dealing with.

  • Linda Williams

    So much for the…. ‘IRS Commissioner Koskinen is a real friend of IRS Whistleblower Program type spiel’ that’s been sold to us for the last 18 months!

    Our only hope rests with Senator Wyden and Hatch’s GAO investigation into the mismanagement of the IRS Whistleblower Program during the last 8 years……from that we may get the legislative reform which will include increasing the jurisdictional oversight of the IRS Whistleblower Program by the Federal Tax Court.

  • the MOST frustrated Whistleblower

    If you can believe it, my claim was made in 1997 and related to information provided in 1996. My information ultimately led to a successful criminal tax prosecution and jeopardy collection of tax by IRS of ~$62K in the taxpayer’s bankruptcy (I have the IRS Proof of Claim and cancelled check to IRS from the bankruptcy file). The taxpayer fought the long-delayed civil assessment (2008?!?!) in Tax Court, where I testified for the IRS. IRS prevailed and the taxpayer appealed to the 11th Circuit, where the IRS again prevailed in 11/2011.

    Over the 18 years my claim has been pending, IRS has used 6103 to refuse to answer even the most benign questions I have had about the status of my claim. Their minimal “your claim is still open and under active consideration” response has gotten quite old. They have refused to even confirm whether a Form 11369 had been prepared.Most recently, they have stated that the SOL for collections must have expired before payment can be made. But more than 3 years have now passed since the final decision (and I’m convinced there was no right to claim a refund afterward anyway) and still no resolution.

    It’s not a lot of money, maybe $10K gross as an award, but the word frustration does not even begin to describe my experience, not to mention the rudeness of the claims examiners I have spoken with over the years. This program is the poster child for failed bureaucracy.

  • Eric Rasmusen

    Dear Most Frustrated—

    Have you written this up for a journalist? Maybe I could help you find one. Publicity and politics are important for this kind of case.

    As for law, the sum is small, but it would be a public service to get it litigated on administrative law principals— in federal district court, probably, not Tax Court. See the Z Street case, about unlawful delay in processing a form. You should be able to get help from the whistelblower bar pro bono, since if you won, that would help everyone, and your case would be a good poster child, it’s so extreme. I think you could do this even tho under teh old statute the IRS is free to give you zero. They’re free to do that, but likely they’re supposed to tell you that sooner than 18 years.

  • Disappointed Whistleblower

    The IRS is above the law. They do not care. They have systematically from the beginning undermined the Whistleblower program and will continue to so. There is clear evidence in Tax Court that they have been summarily issuing denial letters hoping that the Whistleblower will not meet the short 30 day deadline to file an appeal. However, there are three cases 6748-13W, 29562-12W and 13069-14W, where they were caught. They told the Tax Court “whoops, we sent the rejection letters out in error, and the court has no jurisdiction”. Fortunately, the Tax Court has retained jurisdiction and has set status conferences for September. Three cases is a pattern and practice (the tip of the iceberg) not an accident. I feel very sorry for all the people trying to do the right thing that received a denial letter and trusted the IRS. I hope that someday someone will be held accountable. Many of you wonder why the numbers do not add up in the Annual Report this is a reason why!

  • From the Otherside of the Pond

    The IRS has an infinite indeterminable amount of time in which to a Whistleblower’s submissions…. 5-7 years on average maybe longer.

    As with most of the rejections mailed out in the last 2 years the rejection letters have arrived out of the blue without warning.

    The rejection letters mailed from the IRS Whistleblower Office to overseas IRS Whistleblowers take on average 9-10 days to arrive at the destination.

    Nevertheless, the 30 days starts from when the date the letter was mailed in the US.

    In reality overseas IRS Whistleblowers only get about 20 days to launch an appeal. If they haven’t already got a US attorney……………any chance of finding a US attorney to process an appeal is pretty much a non starter.

    If you’re an overseas whistleblower outside the US you really have to ask yourself, is the IRS Whistleblower Program really worth the personal and professional risk? Particularly as the statistics demonstrate there is very little probability of getting a reward after a very long wait. Add to this overseas whistleblowers don’t have the protection of the US Constitution and are not allowed to sue the IRS (US government) in tort if the IRS Whistleblower suffers the negligent disclosure of his her identity as a whistleblower with the attendant loss of professional reputation! JUST NOT WORTH RISKING YOUR LIVLIEHOOD AND PERSONAL SAFTEY.

    The US Government has well documented form reputation for mistreating all sorts of foreign overseas informants whistleblowers.

  • Anish

    Is today the day the WB office releases the annual report? Three day weekend and a full nine months after the fiscal year end would make sense. But this assumes the WB office gives a rat’s ass about anything, which we know they do not. There really must be something that they do not want us to see.