IRS Updates Sen. Grassley on Tax Whistleblower Program

Senator Chuck Grassley, who led the effort to amend the False Claims Act in 1986 and authored the sections of the 2006 law that authorized the new IRS whistleblower program under section 7623(b), had a few questions for IRS Commissioner John Koskinen following a February 2015 hearing on the IRS budget. Koskinen replied to the five questions from the Senator, one of which involved the agency’s tax whistleblower program, and they were posted on Grassley’s website on June 3rd.

The question about the program, which has been routinely criticized in the past few years, had three sub-parts. The Commissioner’s summarized answers follow my condensed version of Grassley’s questions (bold).

– What is the holdup in paying tax whistleblowers the money that they deserve?

The Director of the Whistleblower Office estimated that the IRS will pay 6 to 12 whistleblower awards under section 7623(b) in Fiscal Year 2015. To date, they have only paid 12 awards under this subsection.

The Director verified that he makes timely processing of award claims a top priority but re-emphasized that awards cannot be paid until the audit or investigation is complete, appeals exhausted, proceeds collected, and the statute of limitations on refund claims expired.

– Why is the IRS Chief Counsel office undermining the program by fighting whistleblower payments in tax court with hyper technical arguments?

The Commissioner said that he could not comment on specific arguments because of an order of the Tax Court sealing the record. However, he did indicate that the Chief Counsel works in close cooperation with the Whistleblower Office.

– Why is the IRS civil division not working with whistleblowers when the criminal investigators have used their tips to great success and outside law firms are instead being paid to prosecute IRS claims?

The IRS takes this concern seriously, according to the Commissioner. However, section 6103 provides limited authority to interact with a whistleblower because of concerns about disclosure of taxpayer information.

Our Commentary:

The estimate that the Internal Revenue Service would hand out another six to twelve awards under the mandatory reward program this year was an interesting and surprising one. In the first eight years of the program, only 12 award claims have been approved. So the expected total this year would be a significant increase.

The IRS has in the past estimated that the average claim takes 5 to 7 years to go from start to finish in the agency. As we are coming up on the ten year anniversary of the passage of the Tax Relief and Health Care Act of 2006, it has certainly been a long road to get these cases going. If another ten awards or so are handed out this year, it would be a significant step in the right direction.

If you have questions about this or another aspect of the whistleblower program, feel free to contact one of our IRS whistleblower attorneys via our contact form or by calling 1-800-590-4116.  Our law firm offers a free, confidential initial legal consultation with a lawyer for whistleblowers.

Photo Credit: Greg Skidmore