Is the IRS Whistleblower Program Faltering?
Several years ago, I authored a feature article for the Journal of Accountancy on the IRS Whistleblower program. When the article was written in 2009, Congress had recently amended the law and many folks in the whistleblower community had high hopes for the program. Five years later and the program is faltering.
While the IRS is quick to point out that it paid a record $125,400,000 in whistleblower awards in 2012, one of those awards was worth $104 million. Total awards paid last year were less than half the 2012 numbers and again just one award of $38 million represents most of the $53 million in awards paid out last year. In all, since Congress beefed up the IRS whistleblower program in 2006, just 9 awards have been paid out under the new large award program. That is an average of just over 1 award per year.
Taxpayers are frustrated because the average period to receive an award is 7 years. Unfortunately, we know of one whistleblower who waited 12 years to receive something from the government. Lawyers have expressed similar concerns and are now dealing with the IRS’ decisions to pay claimants directly instead of jointly with the lawyer. That makes it harder for the lawyers to get paid.
Sometimes, the whistleblower’s tip leads to a criminal investigation instead of a civil audit. That can add years to the collection process and often the debt becomes uncollectible for the simple reason that the taxpayer is in prison.
We support whistleblower compensation laws of every type. The IRS and SEC each operate their own whistleblower award program while other federal laws such as FIRREA (Financial Institutions Reform Recovery and Enforcement Act) and the False Claims Act can also pay big awards. Unfortunately, the only program that seems to continuously generate large awards is the False Claims Act. That law is unique in that it allows ordinary citizens to prosecute their own case against the fraudster, however.
Making a claim with the IRS whistleblower program means that only the IRS can investigate the case. Unfortunately, tax audits often take years. Until all appeal periods are exhausted, the IRS can’t pay out reward monies either.
If you think you have information about unpaid or unassessed taxes, speak with an knowledgeable whistleblower lawyer. How you package your case may mean the difference between no award and making hundreds of thousands of dollars. Once you file, however, expect very little feedback from the IRS. That is because of strict taxpayer confidentiality rules. In many cases, whistleblowers forgot all about their claims only to receive a check years later. Unfortunately, in the IRS large award program, just 9 such checks have been paid.
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Need more information? Contact attorney Brian Mahany at or by telephone at (414) 704-6731. All inquiries kept in confidence. We also invite you to visit our IRS whistleblower information page.
Whistleblower photo courtesy of Dave Winer – scriptingnews