On August 30, 2016, the Treasury Inspector General for Tax Administration issued a report following an audit of the IRS Whistleblower Program. The audit was conducted to determine whether whistleblower claims are being appropriately and timely processed for investigation and examination. The report confirms much of what lawyers who practice in this area already know.
First, the report confirmed that the program has the potential for great success. From fiscal year 2011 through 2016, the IRS collected more than $2 billion of unpaid taxes based on information reported by whistleblowers. While this sounds like a great success, lawyers who practice in this area, such as McCabe Rabin, P.A., believe this is just the tip of the iceberg.
The report also confirmed a number of problems with the IRS whistleblower program, most notably, the IRS’s failure to contact whistleblowers to clarify allegations and the IRS’s failure to have proper supervision and oversight to make sure that whistleblower claims are timely processed and referred for examination. The report makes 10 specific recommendations for improving the manner in which the IRS receives, processes, and handles IRS whistleblower complaints.
This is welcome news to lawyers who practice in this area as well as to potential IRS whistleblowers. Under Section 7623(b) of the Internal Revenue Code, the IRS is authorized to pay monetary awards to whistleblowers for information leading to the underpayment of taxes. The program only applies when the amount of underpaid taxes exceeds $2 million. If the whistleblower’s tip leads to collection of unpaid taxes by the IRS, the whistleblower can receive a reward of between 15% and 30% of the collected proceeds.
All IRS whistleblower tips are processed through a central IRS Whistleblower Office. The whistleblower prepares his or her information with as much detail as possible and then files it with the IRS Whistleblower Office. Whistleblowers often wait for months or years without hearing anything from the IRS. During this time, the whistleblower has very little information about what is going on, which is one of the problems highlighted in the recent report.
The IRS Whistleblower program can be difficult to navigate, especially if you attempt to do so without a lawyer who has been through the process before. If you think you have a potential IRS whistleblower claim, Contact our law offices or call 877-915-4040 for a free and confidential consultation.