Whistleblower Office FY 2014 Annual Report Released, What Did We Learn?

Key Points from the Body of the Report

  • Final Regulations were a “top priority” and added “necessary clarification and provided additional guidance for whistleblower submissions under 7623.”(p. 4).  The report also notes that “the regulations confirm that the director, officers, and employees of the Whistleblower Office are authorized to disclose return information to the extent necessary to conduct whistleblower administrative proceedings.”
    • The WBO began the process of updating the IRM, correspondence, policies, and procedures accordingly.
    • The impact of the final regs is further seen in this report as 2 points from the FY 2013’s section on “Other Issues of Interest” are not present in this 2014 report. Those points concerned what constituted “collected proceeds” and a request for clarification of dollar amount thresholds for gross income and amounts in dispute.
  • The Whistleblower Office had a net increase of 3 senior analysts in FY 2014, brining the total staff of the Whistleblower Office to 43.
  • The report notes that the WBO “has seen steady and consistent grown from year to year in both staffing and claim submissions.
  • The Deputy Commissioner, Services and Enforcement directed a program review to ensure the resources committed to the WBO  are “applied efficiently and effectively” – the assessment is expected to be completed in FY 2015.
  • The FY 2014 report again notes that “Rules on access to and disclosure of taxpayer information could provide stronger protection for taxpayers.” – Noting two concerns:
    • (1) Current law does not provide a sanction if a whistleblower discloses taxpayer information in violation of a confidentiality agreement and 6103(h).
    • (2) The whistleblower may disclose the identity of the taxpayer in Tax Court or other judicial proceeding. 
      • The report notes that the second concern was addressed in a revision to Tax Court Rule 345 which now requires the taxpayer information to be masked in documents filed with the Court.
    • As a third (3) concern – the report states that “release of information during discovery in Tax Court proceedings is not addressed in the new rules and has brought a new set of concerns.” (p. 7).
  • The President’s FY 2014 Budget has included a legislative proposal to address this issue by providing a sanction for disclosure of taxpayer information obtained from the IRS as part of the award claim process.
  • The law does not provide for whistleblower protection unlike other laws that encourage whistleblowers to report information. (Same statement as 2013).
  • The WBO has limited information about the extent of whistleblower’s contribution in criminal cases due to information being protected from disclosure under FRCP. (Same statement as 2013).

Notable Statistics from Tables in the Appendix

  • Overall the claim and award numbers are substantially similar to 2013 Report with indications that FY 2015 numbers will be higher.
  • Table 6 of the report shows the awards paid from 2010 through 2014.  There were 101 awards paid in FY 2014 which is down from 2013’s 122 and 2012’s 128.  Collections of $2 million were up in 2014 to 9 from 6 in 2013.  The total amounts of awards paid in 2014 was down slightly from 2013 at $52,281,628 (from $53,054,302 in 2013).  However, the awards paid as a percentage of amounts collected was up to 16.9% in 2014 which is a nice increase from 14.6% in 2013.  (All but one of these wards we paid under section 7623(a).)
  • Sequester required reductions that were 7.2% of the amount that would have otherwise been payable in FY 2014.  Reductions totaling $3,764,722 were applied to awards paid during FY 2014.  Thus, the total amount of payments, after reduction, was $48,516,906.
  • In the “Amounts Collected and Awards Paid” Chart, the report uses the pre-sequester reduction number.
  • Total claims received is up from 2013, going from 10,520 to 14,365 (total submissions were 4,166 up from 4,067 in the 2013 report). (Table 1).
  • The report cited that the most common reasons for denial of claims were “non-specific allegations, issues that were below the threshold for IRS action, and allegations that did not identify a tax issue.” (Table 3).
  • The report cited that a total of 238 claims were closed in FY 2014 as a result of awards being paid in full.  That number is significantly increased from the number reported in the 2013 report, where only 130 awards were paid in full. (Table 3).
  • Overwhelmingly, the most common reason for closures in 2014 was “no tax issue” which differs from the 2013 report that noted “allegations unclear or non-specific” as the most common reason for closures in that year.
  • Table 2 shows that the vast majority of submissions go to SBSE and LB&I.  The table reports that those operating divisions received 138 and 134 section 7623(b) submissions respectively as compared to TEGE, which only received 24. 
  • The only operating division that had more (b) submissions and claims than (a) submissions and claims was CI.
  • Table 4 of the report details the status of open 7623(b) claims for all years.  Particularly noteworthy is the category of “Case Suspended: Whistleblower Litigation Regarding Award Determination” which was reported as 10 claims in 2013, is up to 41 claims in the 2014 report.  Additionally, the category of “Case Suspended Payment Received, Awaiting Expiration of Statute  of Limitations on Taxpayer Claim for Refund” was reported as 161 claims in 2013, is now up to 514 in the 2014 report, which means the IRS has now collected tax as a result of over 500 whistleblower cases for which it has not yet paid an award because it is waiting for the section 6511 statute of limitations on refunds to expire (the “two year rule”).  The table indicates that 2 claims from 2 whistleblowers fall into the category of “Final Award Processing.”  Finally, the report notes that Table 4 does not reflect some changes that were supposed to be made to the data via manual input in FY 2014.  Due to staffing issues, those changes are deferred to FY 2015 and data will be more accurate once those changes are made.
  • Table 5 shows data of “Days in Current Status” of the open 7623(b) claims.  The table shows a significant increase from the 2013 report in both average number of days and longest days of “whistleblower office – initial review” – 85 and 673, respectively (up from 64 and 405 in the 2013 report).  The table includes a status called “whistleblower office – manager approval for preliminary award recommendation letter” – and reports the average number of days and longest days for that status as 42 and 94 respectively.  Although that category was not included in the FY 2013 report, the 2013 report did have a category called “whistleblower office – award evaluation.”  Finally, the 2014 report included a status called “final award processing” and reported average number of days, longest days, and shortest days for that status as 218 for the two claims that fall under this category, which should be the very brief final stage of a whistleblower claim.
  • Bubba Shawn

    The 2014 Report sadly reveals that the IRS WO is still the hungry orphan of the IRS organization in terms of resources and support. It is very disturbing that the WO is only recognizing that most of the whistleblowers’ filings result in 7623(a) claims rather than 7623(b) claims.

    A very legitimate question is that the IRS accounting accurately and completely all the collected proceeds attributable to whistleblower claims? Nobody is questioning the accuracy of the collected proceeds not even the WO. Under the cloak of secrecy, does anybody have a chance to audit the collected proceeds to make sure they are all accounted for. I doubt if the WO even questions that all the collections are accounted for. If the WO can’t get the field offices to prioritize whistleblowers cases, what gives any whistleblower confidence that all the collected proceeds are credited to their claims?

    Way back in 2011 the GAO showed that the WO wasn’t accurately accounting all the collected proceeds.

    The positive revelation was that 16% of all the collected proceeds were paid before the sequestration’s cuts kick in.

    Another question is has any whistleblower ever been paid or ever will be paid 30%?

  • Anish

    What is not and has never been a priority is paying awards to people who risk their careers bringing the WO information. And No mention of making partial awards a priority.

    Nine months to proofread and they get the Section wrong in bold letters on page 10 (7323??). This is a bit too obvious. Any other “typos” I wonder?

    On Table 3 “Awards Paid in Full in 2014” a total of 238 claims paid of which 119, or 50%, were paid in 4 years or less (38% in 3 years or less). Why does the WO office always say it takes 5-7 years for an award to be paid? Is it to discourage future WB from submitting claims? Or is it another way to keep WB from requesting awards if they have “only” been waiting 4 years?

    On Table 5 – WO award evaluation average days 215 (7 months). This despite two memos from Deputy Commissioners that WB should be notified in 90 days (3 months). WO Final Award Processing – 1 case 218 days to process an award?? The theme from this schedule? Payments of awards – the WO will take its sweet time despite rules and regs and guidance from IRS executives. But it seems rejections and denials are processed rather promptly. Of course, this is all because there are no deadlines placed on the WB office and since they do not pay interest they are ENCOURAGED not to pay awards timely. This whole read is very discouraging.

  • Anish

    Bubba, The only reason the percentage is 16% is because of the miss match of years. If the $52M is applied to 2012 collected proceeds of $592m the percentage paid is 9%. But it is likely a made up number anyway.

  • Disappointed Whistleblower

    Unbelievable,1620 claims were denied 25% of all claims (Closed “other”) and they cannot find an appropriate “reason” because the Whistleblower Analysts are not properly trained. Give me a break!

    271 claims denied because the “information was already known”. Then why did you use the information! Why did it take years to figure that out? Nevermind that this “reason” for denial is contrary to the plain language of the statute.

    The only good news is that we are starting to see some transparency. I wish the tax court would rule in Insigna its been over a year and permit full discovery so we can stop the harm being done to good people who are trying to do the right thing.

  • FCA Aficionado

    Just the delay in release speaks volumes as to what he incompetence and intransigence that is the dominant capability and culture of the IRS.

    Grassley pointedly asked the Commisdioner several years ago to try and submit this relatively simple report within 3 months of the close of the business year (ie by Jan 1st), and each year the report comes later and later.

  • Linda Williams

    Hi Disappointed Whistleblower,

    You mentioned Insinga, what’s the latest on the Joseph Insinga case?

    I heard he had changed attorneys and was considering declaring bankruptcy and was discontinuing the legal action.

    Any truth in this?

    The IRS FY 2014 Whistleblower report is the usual out of date inaccurate, inept, deceptive bureaucratic IRS cover-up of negligence and mismanagement…its almost meaningless and irrelevant.

    I’m waiting for the GAO and TIGTA reports and recommendations into the mismanagement of the IRS Whistleblower Program. Sounds like the GAO report on the mismanagement of the IRS Whistleblower Program ordered by Senators Hatch and Wyden is near completion and should be out in the next 6-8 weeks. Allegedly Senators Wyden , Hatch and Grassley have already seen early drafts. This is the real deal that legislative amendments will be based on …………………………………..my fellow long suffering whistleblowers.

  • Disappointed Whistleblower

    Hi Linda,

    Andrew Carr is the attorney for Joseph Insigna and has always been the attorney of record. The case is active. Unfortunately, the tax court has taken over one year to rule on a simple motion regarding the scope and standard of review. By the way it takes the Supreme Court an average of 81 days after oral argumant to publish a decision. There is a famous quote “Justice delayed is justice denied”. The Whistleblower gets screwed again.

  • FCA Aficionado

    https://www.ustaxcourt.gov/UstcDockInq/DocketDisplay.aspx?DocketNo=13009011

    The above is the link to the docket connected with Mr. Insinga’s battle with the IRS.

    According to this, he is still represented by BBF’s Andrew Carr and recently by their Kevin McCormack. There was a strange interlude involving an attorney Dale Tuttle that gained entry and tried to submit items into the record, but it appears the judge booted Mr. Tuttle and struck his submissions from the record.

    Last action was in May but there is no indication of what future actions will are coming, or any judicial mandates for same.

    I sure hope Mr. Insinga is able to prevail over the incompetence of the WBO and the asinine antics of the Chief Counsel’s and P&A offices.

  • Bubba Shawn

    The numbers that IRS WO report doesn’t published are the amounts of unpaid whistleblowers. The Closed claims tables from FY 2013 and FY 2014 gives us those unpaid claims still waiting:

    Pre-2007 = 460 yet to be paid claims
    2007 = 1334 yet to be paid claims
    2008 = 814 yet to be paid claims
    2009 = 1615 yet to be paid claims
    2010 = 5713 yet to be paid claims
    2011 = 1285 yet to be paid claims
    2012 = 584 yet to be paid claims
    2013 = 263 yet to be paid claims
    2014 = 5693 yet to be paid claims

    The total yet to be paid claims is a whopping 17,725.

    Considering the dismal amount of claims that are annually paid, looks like a huge bottleneck in the WO awards process is taking place. Either there is a bottleneck or the IRS is deliberately holding back awards.

    Commissioner Koskinen must delegate more WO staff to pay awards and eliminate the bureaucratic hurdles that presently slow award determinations. Director Whitlock’s desk must be filled with tall stacks of claim files ready for his signature.

  • Bubba Shawn

    Linda,

    What will those legislative changes be? After the 2011 GAO report was published, Senator Baucus was Chairman of the Finance Committee and nothing happened.

    After Senator Wicker’s budget amendment mandating the WO to “expedite” award payments passed with unanimous votes, do you think there are more Senators interested now for legislative changes?

    I, and I’m sure other yet to be paid whistleblowers, hope you are correct.