IRS Identifies Problems with the Whistleblower Program

 Internal Revenue Service

Internal Revenue Service

The Tax Whistleblower Law Firm fully supports the recommendations stated in 2016 report by the IRS National Taxpayer Advocate with respect to improving the IRS Whistleblower Program.  Although much more can be done administratively as well as legislatively to improve the whistleblower program, this is the first real effort by the IRS to identify the problems of the program.

It appears that “lack of communication” by the IRS is the most serious problem.  However just as important is the length of time from the submission of a Whistleblower Claim to the time in which an Award is paid (currently running 6-8 years).  Although much can be done to speed up the process, the Taxpayer Advocate failed to address this very important issue.

The National Taxpayer Advocate recommends that the IRS:

  1. Revise the regulations under IRC § 7623 to provide that a whistleblower “administrative proceeding” within the meaning of IRC § 6103(h)(4) commences with the whistleblower’s submission of Form 211.  (Currently the Regulations provide that an administrative proceeding begins when a preliminary award recommendation letter is sent….which in fact is the end of the administrative proceeding).
  2. Revise the regulations under IRC § 6103 or IRC § 7623 to provide that the IRC §§ 7431, 7213 and 7213A penalties apply to re-disclosures of returns or return information by a whistleblower who has executed a confidentiality agreement as part of an IRC § 6103(h)(4) administrative proceeding, and that the IRC § 6103(p) safeguarding requirements also apply to such a whistleblower.  (Currently there are no stated penalties to a Whistleblower for the disclosure of taxpayer information, although penalties (i.e. forfeiture of the Award) could be stated within the Confidentiality Agreement).
  3. Revise the regulations under IRC § 7623 to require the IRS, upon the whistleblower’s execution of a confidentiality agreement as part of an administrative proceeding under IRC § 6103(h)(4), to provide bi-annual status updates sufficient to allow a whistleblower to monitor the progress of the claim (e.g., whether the claim resulted in an audit, whether the audit has concluded, the existence of any collected proceeds, and whether the case has been suspended) according to procedures developed by the WO.  (Currently the IRS has a pilot program to simply inform the Whistleblower that the Claim remains open).

For unknown reasons, (budget, lack of IRS managerial support, etc.) the IRS is slow/reluctant to act in improving the whistleblower program.  Therefore, it is suggested that Congress look into the matter of enacting legislation to improving the program by changing the law and enacting these recommendations as well as many other recommendations that have been made. 

After all, even the IRS defined its Mission as -

 
Provide America’s taxpayers top quality service by helping them understand and meet their tax responsibilities and enforce the law with integrity and fairness to all.
— Internal Revenue Service
 

Therefore, a bipartisan Congress should support these changes in an effort to collect the billions of underreported and underpaid taxes.