IRS Reviews Whistleblower Program to Encourage Future Participation

September 15, 2012 (Press-News.org) Over the past five years, the Internal Revenue Service has received plenty of tips on delinquent taxpayers through its tax whistleblower program, but many of those tipsters have not been given what was promised to them -- a reward. As a result, the program has met harsh criticism from attorneys and politicians, prompting the IRS to promise a comprehensive review to improve the program. In contrast, the Securities and Exchange Commission's and the Commodity Futures Trading Commission's whistleblower programs have seen early success, bearing fruit and yielding whistleblower rewards.

According to the IRS, taxpayers owe $385 billion more than the federal agency is able to collect because of underreporting. In 2006, Congress created the IRS whistleblower program to increase tax revenue by rewarding people who provide information on individuals and businesses that significantly underreport tax obligations. However, instead of receiving a reward for their information, many tipsters have been forced to wait. So far, more than 1,300 claims have been filed concerning nearly 10,000 individuals and companies with alleged tax underpayments of at least $2 million each. While only a few tipsters have been paid, in a recently-announced award, the whistleblower is receiving $104 million for inside information about tax fraud by UBS Bank.

It seems the popularity of the program has inundated the tax whistleblower program with claims, but the program may be understaffed and lack necessary resources. IRS policies may also have contributed to the agency's failure to reward individuals who report. If whistleblowers are not given what is promised to them under the program, the incentive to report tax fraud may eventually cease, detrimentally affecting the objective of the program.

The failure of the IRS to compensate whistleblowers attracted the attention of tax-policy organizations and national lawmakers. Specifically, Senator Charles Grassley (R-Iowa), who helped craft the law that created the whistleblower program, chided the IRS for failing to process and compensate whistleblowers in an efficient way. Responding to criticisms, the IRS has outlined measures to improve the performance of the program for informants.

Under current IRS policy, IRS agents are allowed to speak with tipsters only once to limit the disclosure of confidential information to whistleblowers, and many informants are left in the cold as cases progress. Under a new policy, IRS agents and investigators will have 90 days to complete initial reviews of whistleblower cases, and when taxes and penalties are collected, informants will be notified within 90 days to claim their rewards. In addition, the internal performance reviews of IRS workers and offices that participate in whistleblower cases will include an assessment of whether their deadlines are met. Finally, the United States Tax Court is reviewing whether tax whistleblowers will have any remedy against the IRS for drawing out the issue of or failing to issue rewards.

Reporting tax fraud or other types of fraud against the government can be complicated. An experienced whistleblower and fraud claims lawyer can provide valuable guidance in the pursuit of a claim and the obtainment of potential rewards.

Article provided by Whistleblower Law Collaborative
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