The U.S. Government Accountability Office has issued a report on the IRS whistleblower program following a year long audit of the program, its operation and the underlying data generated. The 2015 report concludes that the financial incentives of the rewards program have led to billions collected but that delays and communications problems may discourage whistleblowing.
The Office of the Whistleblower at the IRS has awarded over $315 million between FY 2011 and June 30, 2015 to individuals submitting information about tax noncompliance. There were 17 awards paid during that time under the 7623(b) program, which resulted in $261 million in payouts to IRS whistleblowers. This program was put into place following its passage in the Tax Relief and Health Care Act of 2006.
The 483 awards under Section 7623(a), which involve information provided under the discretionary program for claims of $2 million or less as well as those tips provided before the 2006 law went into effect, accounted for $54 million in awards and total collected proceeds of $853 million.
* In total, 500 whistleblowers have of approximately $1.88 billion over the past four years.
* The IRS found that the WO has made errors in award determinations which resulted in over- and underpayments. The IRS has since begun corrective actions to verify collected proceeds prior to payment.
* Over 95 percent of the claims closed since FY 2013 have not received an award payment. Among the reasons claims are closed early include unclear submissions, a lack of specific information, or the claimant lacked credibility.
* Staff growth in the whistleblower office has not kept pace with workload due in part to Congressional reductions in the budget.
* The 17 paid 7623(b) claims took 4 years to 7.5 years from Form 211 submission to award payment.
* The majority of the 7623(b) awards were at 22 percent of collected proceeds with several at the maximum level of 30 percent.
* Over half of the awards had a lawyer representing the whistleblower. Some IRS whistleblower attorneys the GAO spoke with indicated that they are. One attorney went so far as to indicate that he appeals award determinations in order to learn more about the program and improve future submissions.
* Backlogs were specifically identified in the process at the agency’s initial review of tips, award determinations for 7623(a) claims, and denial letters.
* The annual report for the program in FY 2014 was delayed eight months due to the need for it to be reviewed by the IRS, the Treasury Department, and the Office of Management & Budget (OMB). The Whistleblower Office reportedly had compiled the document by mid-December 2014.
* The gross tax gap for tax year 2006 was estimated at $450 billion. The IRS estimates that it will eventually collect $65 billion.
The examination interviewed IRS officials including employees of the Operating Division and the Whistleblower Office. It reviewed the relevant regulations, data from the E-TRAK system used by the IRS Whistleblower Office, claim files for awards under section 7623(b), communication plan and legislative proposals for change. OIG also spoke to whistleblowers and whistleblower attorneys concerning their experiences and recommendations.
The GAO was asked to look at the timeframe and staffing of the claims process, the determination process for awards under section 7623(b), to evaluate the communications process, and examine the policies and procedures for safeguarding whistleblower identities and protect them from retaliation.
The IRS response noted that the office had previously identified many of the drawbacks concerning the program discussed in the report, and is in the process of updating policies and procedures to address them. Following the leadership change at the Office of the Whistleblower this summer, when Lee Martin stepped into the role as Director previously occupied by Stephen Whitlock, the agency has been studying potential improvements to their operations. It also but that it is hampered to address some of the concerns by law – they
The GAO’s last report concerning the IRS whistleblower program was published in 2011. The report urged the Whistleblower Office to improve its communications with individuals providing tips and better track data regarding the tips moving through the system.
The recommendations in this report, which are tracked by the GAO, have all been implemented. Most of them were implement between June and August of 2014. However, the IRS did not release an updated Form 211 to collect additional information from whistleblowers until April 2014.
Other Government Requests for Information
The report is not the only examination by the government into the whistleblower programs. Following the release of the SEC’s annual report to Congress concerning its Dodd-Frank whistleblower program, Senators Grassley and Warren sent a letter to SEC Chair Mary Jo White requesting additional information to follow up on the OIG report about the SEC program released in 2013.
The latest GAO Report is available at http://www.gao.gov/assets/680/673440.pdf