A just released report shows the IRS collected $400,000,000,000 less in 2009 than in 2008. (Yes, that is 400 billion.) No surprise there – the economy remains in a slump and placing food on the table occupies a higher importance than paying taxes for many families.
The same report, released by the Treasury Inspector General for Tax Administration, also revealed that the government ramped up collection efforts and enforced collection procedures last year. Again, no surprises.
Looking at federal budget documents, the IRS hired an additional 2000 revenue agents last year. Couple that with hundreds of new revenue officers and criminal special agents and its easy to see the handwriting on the wall. Increased audits, more sophisticated revenue discovery techniques and more enforced collections are on the horizon this year.
Taxpayers can continue to expect more scrutiny. Those with unpaid taxes can really expect to see more “heat,” including an increased risk of criminal prosecution.
While 2000 agents means tens of thousands of additional audits, the biggest threat to deadbeat taxpayers is the new IRS whistleblower program. Ever since the United States has had taxes, the Treasury Department could pay rewards but rarely did. The recent changes to the agency’s whistleblower program guaranties that the IRS’ new 2000 agents will have plenty of cases to investigate.
Why? Because the new program pays whistleblowers up to 30% of whatever the IRS collects from tax cheats. And the awards are calculated not just on the taxes but interest and penalties as well.
Under the old program, there was no way to really track rewards or get paid if the Service didn’t feel like paying. The program was so bad that lots of whistleblower lawyers wouldn’t even bother. The new program, however, allows whistleblowers in large cases to get their day in court. If the Service doesn’t pay, the whistleblower can go before a U.S. Tax Court judge and demand answers.
The new law also established a central office and repository for whistleblower cases. Before it was difficult to even find where your whistleblower claim went let alone what happened to it.
Want more reasons? Unless there is a court dispute, your name will probably remain anonymous. The IRS says it will keep whistleblowers’ identities secret unless needed for court. (Very few IRS cases ever go to court.)
How the IRS Whistleblower Program Works
If the taxes, penalties, interest and other amounts in dispute exceed $2 million, and a few other qualifications are met, the IRS will pay 15 percent to 30 percent of the amount collected. If the case deals with an individual, his or her annual gross income must be more than $200,000. In smaller cases, the award is up to 15% (not to exceed $10 million).
2021 update: When we first wrote this post in 2010, the IRS hired thousands of new agents. Guess what? That was the last year that the IRS would beef its ranks for over a decade. In fact, until 2021, the IRS has been shrinking. Audits and criminal enforcement actions are way down.
Things re so bad that over the last decade IRS staffing is down by 40%! And because the IRS must always process tax returns and answer the phones, most of those reductions came from the audit and enforcement budgets.
While its good to know that the IRS is gearing back up, there have been so many retirements over the last decade that it will be quite some time before the IRS catches up. That makes whistleblowers even more important in the fight against tax cheats.
In the latests audit statistics from the IRS, even high wage earners making between $1,000,000 and $5,000,000 only have a 2% chance of being audited.
No one likes paying taxes but what really ticks off most taxpayers is finding out that someone else is paying their fair share. For every dollar not paid by a tax cheat, the rest of us have to make it up. That is where whistleblowers come in. With so few audits these days, the IRS is relying on folks with inside information about fraud to help them pick the best audit targets.
You can make a difference and earn a reward.
For more information, please see the article written by Brian Mahany for the American Institute of CPAs or visit our IRS whistleblower page. Ready to see if you have a case? Contact Brian Mahany directly online, by phone 202-800-9791 or email at for a confidential consultation. Cases accepted worldwide.