Recently, Muckrock News issued a Freedom of Information Act (FOIA) request to the IRS to obtain the annual budgets of the IRS whistleblower office since 2000, and minutes of meetings in which the whistleblower office was discussed.
While the IRS declined to provide minutes of meetings, they did release the annual budgets of the IRS whistleblower office from 2007-2019.Muckrock News published the following chart reflecting the IRS Whistleblower Office budgets:
|Whistleblower Funding FY2007-FY2019||2007||$ 91,808.76||2008||$ 1,164,316.90||2009||$ 1,671,124.50||2010||$ 2,689,380.57||2011||$ 3,317,732.48||2012||$ 3,719,737.15||2013||$ 4,769,427.36||2014||$ 4,920,363.93||2015||$ 5,781,558.77||2016||$ 6,141,103.65||2017||$ 5,824,072.82||2018||$ 6,014,662.11||2019 BUDGET||$ 6,232,249.26|
Muckrock news made the following observations:
1. Despite a relatively small budget ($6 million), the IRS Whistleblower Office recovered $1.4 billion in taxes and paid out $312 million in awards, as reflected in the following chart (NOTE: Data reported as of September 3, 2018)
|Table 1: Amounts Collected and Awards under IRC § 7623||FY 2016||FY 2017||FY 2018|
|Total Claims Related to Awards||761||367||423|
|Total Number of Awards||418||242||217|
|Total IRC § 7623(b) Awards||18||27||31|
|Total Amounts of Awards||$ 61,390,910||$ 33,979,873||$ 312,207,590|
|Proceeds Collected||$ 368,907,298||$ 190,583,750||$ 1,441,255,859|
|Awards as a Percentage of Proceeds Collected||16.6%||17.8%||21.7%|
2. IRS whistleblower Office’s budget has been relatively small (started at $90,000 and is now only $6.2 million) and steady (no major increases since 2015) despite its ability to recover significant unpaid taxes.
The IRS Whistleblower Office’s budget also tells us these 3 additional points:
1. Despite the IRS’ attempts to claim that whistleblower awards are budgeted items subject to sequestration (a 2019 reduction of the award by 6.2%), the actual IRS Whistleblower Office budget does not reflect the awards as a budgeted item tied to the IRS Whistleblower Office budget. Since the whistleblower awards are not included in the IRS Whistleblower Office’s budget, and since the IRS can’t point to the exact budgetary line in which the whistleblower awards are located, the IRS should not be imposing sequestration on whistleblower awards. This means that of the $312 million paid in 2018 by the IRS Whistleblower Office, it withheld approximately in aggregate, $20 million dollars due to sequestration. This practice should be stopped.
2. Muckrock’s FOIA request highlights something we have been stating in our blog; the IRS Whistleblower Program works and works well given its relative low cost to the IRS. As noted, with a budget of $6 million (total investment), the IRS whistleblower program recovered $1.4 billion in taxes in 2018. Even assuming the amounts paid as award as a cost along with the IRS Whistleblower Office budgeted amount, the return on investment is 18,033% (((1,400,000,000-318,000,000)/6,000,000) * 100).
Even if one were to assume that the total of the annual budgets of the IRS Whistleblower Office since 2007 ($46,105,289) is the amount the IRS invested in the IRS Whistleblower Office, the return on the investment based on only the 2018 recovered taxes would be 2,259% (((1,400,000,000-(46,105,289+312,000,000))/46,105,289)*100).
These figures point clearly that the IRS Whistleblower Program is working.
3. This leads to the third point, namely, that the IRS should be increasing its investment in the IRS’ Whistleblower Program. How? One way would be to increase the budget of the IRS Whistleblower Office. The Muckrock data suggests that since 2015, the IRS Whistleblower Office budget has remained relatively steady and has not increased. By increasing the Whistleblower Office budget, the IRS could handle and process more claims, which could lead to more taxes recovered and further reduction of the Tax Gap.
IRS could also increase the investment in the Whistleblower Program by refusing to make arbitrary reductions of the awards paid to the whistleblowers. By this, we mean the IRS can stop sequestration, which accomplishes nothing except reducing the incentive to whistleblowers to file claims.
Another way to invest in the program is to pay interest on whistleblower awards. The IRS can further incentivize whistleblowers for their information and offset the already long process (9.32 years) by paying interest from the date the tax dollars are collected to the day an award is finally paid.
If you have substantial and credible information of a significant underpayment of taxes, contact one of our attorneys to discuss your potential claim.
Author, SHINE LIN strives to present a balanced yet focused claim which allows the IRS to concentrate on the key facts, legal issues, law and legal analysis so that the IRS may successfully pursue the alleged wrongdoers.