Wednesday, July 4, 2012

Is there Hope for the IRS Whistleblower Program?

The IRS Whistleblower Program has been the subject of repeated criticism from several corners.  For example, in a Forbes article last March, "IRS Whistleblowers See Little Reward," Erika Kelton of the Phillips & Cohen firm, one of the leading relator firms, accused the IRS of "sitting on a mountain of whistleblower claims" and  asserted that the "real problem" in processing these claims is "the IRS itself and institutional resistance to whistleblowers within the IRS that is hobbling the whistelblwoer program and draining its enormous promise." In fact, Kelton quoted the former IRS Chief Counsel as saying, "The new whistleblower provisions Congress enacted a couple of years ago have the potential to be a real disaster for the tax system. I believe that it is unseemly in this country to encourage people to turn in their neighbors and employers to the IRS as contemplated by this particular program. The IRS didn’t ask for these rules; they were forced on it by the Congress."

Criticism of the IRS Whistleblower Program has not been limited to relators' counsel. As detailed in Whistleblower Protection Blog, Richard Renner discusses two recent reports prepared by the Treasury Inspector General for Tax Administration and the General Accounting Office that were critical of the IRS Whistleblower Program. See IG Report says IRS Whistleblower Office falls short and resists audit.

According to a recent article in Accounting Today, "IRS Plans to Fix Whistleblower Program," the IRS is responding to this criticism.  In a June 20th memo, the IRS Deputy Commissioner for Services and Enforcement pledged to work with "the Whistleblower Office and with internal and external stakeholders on a comprehensive review of operating guidelines and procedures . . . . . to improve the timeliness and quality of decisions as the Service evaluates and acts on whistleblower information."  Outlining proposed internal deadlines for reviewing whistleblower claims, the Commissioner stated: claims received by the Whistleblower Office "should be initially evaluated by the office within 90 days" and review by subject matter experts from the Operating divisions and Criminal Investigation "should be completed within 90 days of receipt."

The Accounting Today article, which I commend to readers, further discusses efforts by U.S. Senator Charles Grassley to pressure the IRS to improve the Whistleblower Program and highlights a recent Bloomberg article that was critical of the IRS Program as well, as it relates that "in the past five years, over 1,300 claims have been filed against nearly 10,000 companies and individuals, alleging tax underpayments of at least $2 million, but only three whistleblower awards have been paid so far under the new program." 

A. Brian Albritton
July 4, 2012

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