The IRS Whistleblower program is intended to expose tax fraud and underpayments in excess of $2 million per taxpayer liability. In cases where the whistleblower provides information regarding significant tax fraud to the government, and the government makes a recovery, the whistleblower can receive a reward of between 15 and 30 percent, with some exceptions.
Since 2011, the Internal Revenue Service (IRS) Whistleblower Office has recovered over $1.8 billion in taxes owed to the federal government as a result of the program. Whistleblowers, according to a report from the Government Accountability Office (GAO), have collected a total of $315 million in rewards over the past four years.
It would seem, from these numbers, that the program has had some success. Collecting over $1.8 billion in revenue may seem small compared to the $450 billion tax gap that currently exists, but the program has made significant strides in advancing whistleblowing in this country.
With that being said, however, there are several problems with the procedures put into place by the Whistleblower Office that interfere with the ability of the office – and others – to assess the program’s performance.
Limited Communication with Stakeholders
The GAO determined that one weakness with the program involves limited communication to all interested stakeholders.
Specifically, the Office pointed to delays in annual reports to Congress, incomplete data, and limited program information for whistleblowers. According to the report, “Delays in issuing the annual reports have resulted in last-minute revisions that introduced discrepancies and inconsistent reporting periods that preclude year-over-year comparisons.” This prevents the GAO and IRS from accurately assessing payments, which has resulted in over- and underpayments totaling over $100,000. The report for fiscal year 2013, for example, was issued over six months after the fiscal year had ended, and the report for fiscal year 2014 was issued eight months after.
A perhaps more problematic area involves information to the whistleblower community. Those in the community have received fact sheets on the program, but these fact sheets haven’t included key pieces of information, such as time ranges for steps in the review process. Whistleblowers need a full grip of information so they can make informed decisions. Otherwise, their contributions are hindered.
Additionally, there is a significant lack of sufficient data to assess the performance of the program, especially involving claims being pursued in a timely manner (cases routinely take multiple years to process). It has become difficult for authorities charged with oversight of the program to evaluate the program’s efficiency without suitable data.
Lapses with Procedures to Protect Whistleblowers
The report from the GAO also indicated that there were significant problems with procedures put into place to protect the identity of whistleblowers and protect whistleblowers themselves from reprisal.
While the IRS and the Whistleblower Office take steps to protect whistleblowers, there have been lapses. For example, there was a lack of documented controls over sending mail to whistleblowers, which led to sensitive information being sent in one instance that could’ve compromised their identity. These lapses must be avoided in order to safeguard the identity of those who are taking on great risk to report on tax fraud and avoidance.
Perhaps more disturbingly is the finding that there is no statutory protection for whistleblowers against retaliation from their employers. The IRS supports such provision, but there haven’t been any put into place since the program began, primary due to significant opposition from the business community. These inadequate protections have the unfortunate effect of discouraging would-be whistleblowers from coming forward – particularly if the Whistleblower Office cannot always guarantee protection of their identities.
The Whistleblower Program Moving Forward
Despite these problem areas, the tax whistleblower program is moving forward and could increase the amount of taxes collected in the upcoming years as the program matures and as more information is accurately disseminated to potential whistleblowers.
Inside Knowledge and Documentation Make for a Good Whistleblower
While the program does not restrict who can be a whistleblower, those with the most likely chance to succeed in helping the Government ferret out tax fraud and be rewarded for their efforts are individuals with intimate knowledge of the tax fraud and documentation to support the details and amount of the fraud. Examples of such information includes, invoices, ledgers, internal audits, cashed checks, bank statements, emails, internal audits, account numbers for hidden bank accounts, video or audiotaped information.
If you have proof of tax fraud or tax avoidance from your employer or other entity or individual, you can be compensated by the IRS for your contribution. Contact me if you have any questions about the program or if you would like to step forward.