GAO Issues 2015 Report on IRS Whistleblower Program

Today, November 30, 2015, the U.S. Government Accountability Office (GAO) issued its report on its audit of the IRS Whistleblower Program.  The title of the Report is simply “Billions Collected, but Timeliness and Communication Concerns May Discourage Whistleblowers.” 

The IRS Whistleblower Program is a work in process that has, and will continue to, change over time.  The IRS Whistleblower Program is the most powerful tool that Congress could have given the IRS to enforce tax compliance.  However, to date, the IRS has failed to properly utilize this tool in accordance to its mission statement. 

For unknown reasons (perhaps the IRS lack of resources, its failure to prioritize these cases, and its overall attitude towards the success of the program, etc.) the IRS has not prioritized and expedited these whistleblower cases resulting in a weak program.

As time brings change, perhaps, the following Recommendations, as set forth by the GAO, will bring good changes to the program.

Matter for Congressional Consideration

1.     Matter: To further encourage whistleblowers to provide information to IRS about serious tax noncompliance and to protect whistleblowers, Congress should consider legislation that would provide protections for tax whistleblowers against retaliation from their employers.

Recommendations for Executive Action

1.     Recommendation: The Commissioner of Internal Revenue should direct the Whistleblower Office Director to strengthen the procedures for calculating award amounts and for the issuance of the preliminary award recommendations and award letters to whistleblowers. Such procedures should include, at minimum, a documented process for: (1) supervisory review prior to the director's concurrence, (2) verifying collected proceeds prior to an award payment for both the 7623(a) and 7623(b) programs, and (3) reviewing preliminary award recommendation and award letters to the whistleblower prior to their issuance.

2.     Recommendation: The Commissioner of Internal Revenue should direct the Whistleblower Office Director to provide additional information in the annual report to Congress to better explain the statistics provided and the categories of claim review steps reported. Specifically, the report should (1) include correct, reliable data that reflect only the activities of the fiscal year of the report; (2) describe all status categories and clearly identify claim type in the tables; and (3) include an overall timeliness measure (by providing an average and range) to show how long claims take to go from submission of Form 211 to closure decision.

3.     Recommendation: The Commissioner of Internal Revenue should direct the Whistleblower Office Director to develop an additional or revised fact sheet about the whistleblower claim process and/or publish additional information on the IRS website. Such information should include (1) an outline of the entire claim review process, with an average time or time range for the various review steps; (2) a description of the key taxpayer rights that a taxpayer may exercise and how much time this may add to a claim's review; (3) examples to illustrate common circumstances that result in denials; and (4) items to include in a Form 211 submission, and suggestions for the types of documentation that are particularly helpful to the WO.

4.     Recommendation: The Commissioner of Internal Revenue should direct the Whistleblower Office Director to develop a comprehensive plan for evaluating the costs and benefits of the pilot annual status letter program, including obtaining feedback from whistleblowers in the pilot regarding the usefulness of the letter.

5.     Recommendation: The Commissioner of Internal Revenue should direct the Whistleblower Office Director to establish a process to ensure whistleblower addresses are being properly updated in E-TRAK to ensure the WO does not send whistleblower mail to outdated or incorrect addresses. This process could include developing a change of address form specific to whistleblowers and including a blank copy of it in every correspondence with whistleblowers or referencing the importance of updating the WO with any address change in every correspondence with whistleblowers.

6.     Recommendation: The Commissioner of Internal Revenue should direct the Whistleblower Office Director to formally document a procedure for return address labels for mail originating from the WO that states that external envelopes should not identify the WO as the sender of the correspondence.

7.     Recommendation: The Commissioner of Internal Revenue should direct the Whistleblower Office Director to record refund statute expiration dates in E-TRAK and monitor expiration dates routinely so that the award payment process can start as soon as the claims are eligible for payment.

8.     Recommendation: To ensure timely and consistent information to Congress and the public, the Secretary of the Treasury should issue its Whistleblower Office annual report to Congress no later than January 31st each year covering the prior fiscal year.

9.     Recommendation: The Commissioner of Internal Revenue should direct the Whistleblower Office Director to implement a staffing plan for streamlining the intake and initial review process to make more efficient use of staff resources.

10.    Recommendation: The Commissioner of Internal Revenue should direct the Deputy Commissioner for Services and Enforcement to develop guidance for examiners in operating divisions to use in determining whether an Internal Revenue Code section 6103(n) contract with a whistleblower would be beneficial and outline the steps for requesting such a contract.

11.   Recommendation: The Commissioner of Internal Revenue should direct the Deputy Commissioner for Services and Enforcement to strengthen guidance and procedures to ensure whistleblower information is retained only in the proper file locations. Such procedures could include requiring management sign off of taxpayer file reviews to ensure all whistleblower information has been appropriately segregated and sent back to the WO.

IRS Tax Whistleblower Service at no Cost

In an effort to promote the IRS Whistleblower program, the Tax Whistleblower Law Firm is willing review and suggest changes and modifications to IRS Whistleblower Claims at no charge to those individuals that desire to file their own IRS Whistleblower Claims.  We are willing to do this at no cost to the Whistleblower because we believe in the IRS Whistleblower program and want to see it successful in the years ahead.  We, as taxpayers, are all in this together, and certain taxpayers should not be circumventing the law simply because they can, or have been in the past.  The only condition is that we have the opportunity to provide our review prior to submission of the IRS Whistleblower Claim to the IRS.

This blog will provide information to those individuals that would like to file an IRS Whistleblower claim without the assistance of an IRS Whistleblower attorney/lawyer.

Although it does not appear to be a complex matter, the IRS simply requires that such an individual file a one page Form 211, Application for Award for Original Claim….nothing more.  There are 18 relatively easy questions, which include 9 questions (name address, etc.) just about the whistleblower.

As the IRS states in the instructions to the filing of the IRS whistleblower claim, as well in Notice 2008-04, the information provided should be “specific and credible.”  To the extent the IRS whistleblower has documentation, we certainly recommend that the IRS whistleblower claim contain not only specific and credible information, but be accompanied by supporting (i.e. relevant) documentation.  Remember, with specificity comes credibility.  All the information should be presented clearly and concisely.  Take into consideration all the positive factors the IRS will consider when determining the maximum IRS tax reward that you may be entitled and try to meet those positive factors.  See our prior blog on the IRS computation of a tax reward

Our office also recommends that the 211 claim, or 211 claim package, contain the same type of information that an IRS administrative file might contain, should the IRS have completed its examination and sent the case forward for trial.  As former IRS attorneys we strive to provide all the necessary information and documentation that the IRS needs in the processing of the claim and the completion of the examination, including a legal analysis of the substantive tax issue.  We will make specific suggestions as we review the files on a case by case basis for those whistleblowers filing their own claim.

The above is what is recommended for the submission of an IRS whistleblower claim.  An experienced and knowledgeable tax whistleblower attorney will only be able to assist if they are tax attorneys familiar with the substantive tax issue and experienced with the IRS whistleblower procedures.  Such an attorney will provide value assuring that the 211 Claim is clear and concise and will be accepted into the program.  In addition, the IRS whistleblower attorney work to maximize the reward, shorten the examination time (hence the time for pay off or the reward), and protect the identity of the whistleblower, including providing a guarantee.

Other reasons to consider an experienced tax whistleblower attorney include the continuance guidance through what is likely a 5 to 7 year process.  The attorney will supplement the claim over time with new and material information should such information exist.  The attorney will accompany the whistleblower to any meetings for which the IRS desires to meet with the whistleblower and will prepare the whistleblower for such meeting. Lastly, the experienced tax whistleblower attorney will handle the administrative and judicial appeal at no additional cost.

The Tax Whistleblower Law Firm has submitted hundreds of tax whistleblower claims over the years for billions of dollars and, to date, has had every case accepted into the IRS Whistleblower Program.  Therefore, again, if you are filing an IRS whistleblower claim and would like, at no charge or commitment, comments and recommendation by the former IRS attorneys of the Tax Whistleblower Law Firm with respect to your IRS whistleblower claim, call 1-877-404-1040 or complete an email request on our Contact page.

The Success of the IRS Tax Whistleblower Program (i.e. Payment of Tax Reward) is in the Hands of the IRS.

A recent comment by the Director of the IRS Whistleblower Office indicates that the IRS is serious about ensuring the success of the Tax Whistleblower Program.

“Where There Is A Choice, The [Tax] Whistleblower Should Win.”

This comment says it all.  There are many tough decisions to be made by the IRS, but if the above quote is the true reflection of the attitude of the IRS, then the IRS Tax Whistleblower Program is on its way to being highly successful.   However, as background to the above quote, it was said in the context of considering the “fair” and “right” thing to do in tax whistleblower situation.

IRS Whistleblower Office

Some of the tough issues facing the IRS are ….

Is the term “collected proceeds,” as used in I.R.C. § 7623, going to be narrowly defined in the final regulations that are yet to be issued?

We will see.  The IRS could go with the true meaning of Congress and reward the tax whistleblower for his/her contribution….or it may narrowly define the term “collected proceeds” as it did in the proposed regulation.  For instance, will the term “collected proceeds” include future amounts collected (under certain circumstances) rather than simply past amounts?  Will collected proceeds take into considerations net operating losses (NOLs) or tax credits carried back or forward to the years for which the tax whistleblower provided information?  Will collected proceeds take into consideration offsets as to refunds owed the taxpayer on other years?

Will the IRS recognize that it must make partial payments to a Tax Whistleblower if there are no prohibitions as to making a partial payment….or will the IRS wait as long as possible in making the tax reward payment to the Whistleblower? 

The IRS can always wait until the last penny of tax is collected with respect to a tax liability or until the ten year statute of limitations expires before it feels obligated to paying the tax award/reward to the whistleblower.  In fact there are no statutory (or self imposed) deadlines in which to pay a tax reward/award to a whistleblower.  However, the IRS may realize that if there are no prohibitions (i.e. the assessment of tax is final (i.e. no further avenue of appeal) and/or the collection of tax is not subject to a claim for refund (two year rule)) as to making a partial payment, it will immediately make the partial payment of the tax award/reward to the Tax Whistleblower. 

Currently this office has submitted a request for partial payment of a tax reward/award for which the Form 211 Claim was filed in 1999 and the tax was paid in 2005.   Hopefully the IRS will side with the Whistleblower in this matter and make a partial payment of the tax reward/award in an effort to promote the Tax Whistleblower Program.

Is an “administrative action” as used in I.R.C. § 7623 a “detection of tax” the result of a tax examination, tax assessment, court decision, or is it simply an action by an “administrative agency”, that might include opening a whistleblower file, making a telephone call to the taxpayer, sending a letter to the taxpayer, establishing an “amnesty program” due to the Whistleblower’s Claim, issuing a new Tax Regulation/Notice as a result of the Tax Whistleblower Claim.

Does a “related action” as used I.R.C. § 7623 include subsequent tax years with respect to the same ongoing issues raised in the tax whistleblower claim?  Does it include other tax issues discovered by the IRS in the tax examination for which the whistleblower provided information?  Does it include other taxpayers for which the IRS discovered as a result of the tax whistleblower claim?

How does the IRS allocate the tax reward between two whistleblowers who both substantially contributed to the determination of tax?

As the bottom line to this blog, there are dozens, if not hundreds, of unresolved issues that will be resolved over time.  Let’s hope the IRS lives by the motto…Where There Is A Choice, The [Tax] Whistleblower Should Win.

 Should you have any questions or comments as to the IRS tax whistleblower program or obtaining a tax reward, please post comments to this blog, visit our Contact page or call the former IRS attorneys at the Tax Whistleblower Law Firm at 1-877-404-1040.