In August 2011, the Government Accountability Office (GAO) published its conclusions on the effectiveness of the Internal Revenue Service’s whistleblower program and how it could be improved. This program was a part of the newly expanded whistleblower legislation that passed Congress as the Tax Relief and Health Care Act of 2006. The report suggests that incomplete data assessing the time spent processing whistleblower cases has caused a severe backlog where decisions are issued years after their initial filing. This has been a source of frustration among whistleblowers and their attorneys because they left waiting without any indication of the progress being made on their cases. Progress is being made toward improving time efficiency, but the GAO does highlight several important steps that the IRS can make which would go a long way to projecting confidence in the whistleblower program. Perhaps by being more transparent with the public and keeping data on the review process, the Whistleblower office can increase its efficiency and ensure that those cases with merit avoid falling through the cracks.
Information about the whistleblower program dates back to 1867 when the government first began to pay individuals that helped expose illegal tax abuse. In 1996, the law was amended to allow whistleblowers to be paid from any funds recovered by the government, but the amount could only rise to 15% and was capped at $10 million. Finally in 2006, the expanded program allowed for mandatory payments to the whistleblower between 15-30% of the recovered amount, as well as the removing any caps on what could be rewarded. This program was a huge step in the right direction, but still had its shortcomings. Because of current tax codes, the IRS could not disclose to the whistleblower what stage they were in during the investigation; the agency could only disclose if the case was open and closed. The program also didn’t include a set time limit for review, during which time the case passes back and forth between analysts, researchers, managers, and experts trying to determine if it is credible. The GAO believes that these problems become contributing factors to the inefficiency of the IRS’ whistleblower program.
What exactly will come from this report depends on the IRS’ willingness to take steps to correct the problem. The fact that this audit was done and now is available for scrutiny allows us to hope that the necessary changes will be made to promote a more efficient review process. There are several things that can be done to instill the confidence that is desperately needed for the whistleblower program.
First, as the GAO report points out, there needs to be more accountability between the Whistleblower office and how much time it takes to review the credibility of cases, along with the field operation division which is tasked with finding the evidence needed to pursue action. Mandatory, detailed reports would allow each division to understand what has already been done, so that time is not wasted repeating or skipping steps. By initially including further details, the review may take longer, but it also saves any time that may be lost if a step needs to be repeated or if it is unknown how long the next part of the review will take. It helps to set up a systematic process with detailed time reports so that confusion is avoided when one office has time targets and another does not. There are advantages and disadvantages that the GAO report outlines, but it cannot be denied that having greater accountability would force managers to use their time more efficiently to complete their work.
Another way to ensure greater cooperation with the Whistleblower office is to be more transparent with the public. Current tax codes bar the IRS from releasing tax information to the public, which they have interpreted as including status updates of whistleblower cases. As a result, those whistleblowers whose careers hang in the balance are left to wait for an outcome for years. The GAO report even says that time is wasted fielding calls about status reports that they are not allowed to give. In order to avoid wasting time, the IRS could release a general timetable that the public can consult which outlines which stage of the process the case has entered during a given amount of time. If mandatory time records were kept, as suggested above, the IRS could create this timetable and cut out the need to address unnecessary status updates.
Finally, it is worth noting the continued secrecy of the IRS when it comes publicly reporting the outcomes of these cases. If the public knew that the Whistleblower office was successfully prosecuting cases, then more people would have the confidence to come forward with evidence about fraud that they have encountered. The GAO report talks about “several” cases that have paid out awards, but the only reported case came from EganYoung, whose client has not been named to protect their identity. If the Whistleblower office were willing to state openly that, for example, three cases were awarded in August, then other potential whistleblowers would see an incentive to submit paperwork and purse their cases. The continued secrecy of the IRS and the perception that it cannot handle its cases in a timely fashion only work to undermine public confidence in the government’s ability to respond to fraud.
It is important to point out that the IRS is not wholly responsible for the problems laid out in this article. The agency can only do so much with the resources it is given and the current laws that restrict some of its actions. GAO’s report shows real progress in addressing the problems of prosecuting whistleblower cases and we can only hope that the report will initiate further change. In response to the report, the IRS has even acknowledged its shortcomings and stated that it would, to the best of its ability, implement the suggestions and recommendations outlined toward the end. This willingness to take the next steps shows that the government is serious about trying to prosecute fraud and hopefully the necessary changes can be made that will instill confidence in future whistleblowers to come forward and expose illegal behavior.
Young Law Group, P.C., Attorneys-at-Law, represents whistleblowers nationwide. For a free confidential consultation, please call Eric L. Young, Esquire at (215) 367-5151 or email to firstname.lastname@example.org.