Tax Whistleblowers Gain New Protections and Collect Over $120 Million in Awards in 2019
The IRS Whistleblower Program released its FY 2019 Annual Report to Congress this week, sharing details on its continued efforts to improve transparency, enforce whistleblower anti-retaliation provisions, and enhance communications. The IRS Whistleblower office also reported that in 2019:
- The U.S. collected over $616 million in proceeds attributable to whistleblower information; and
- The IRS paid over $120 million in awards paid to whistleblowers.
- Active claims were distributed somewhat evenly across the three US geographical regions (Western, Central, and Eastern), with another significant portion coming from international whistleblowers, demonstrating the reach of the IRS program.
Since its inception, the IRS whistleblower office has paid informants $931.7 million in awards from the $5.7 billion in collected proceeds.
The Whistleblower Office called attention to, and requested statutory clarification on, one potential hurdle to accurately tracking and disclosing the number of active claims being handled by the Whistleblower Program. The Office pointed to a lack of clarity over what triggers the classification of a claim as a whistleblower complaint (resting on the “claim for award” language), which thereby enables the Office to effectively track and manage filed claims. The confusion arises because information comes in from various sources, often without the informant desiring a payout and, therefore, the requisite filing of Form 211 (Application for Award for Original Information), which typically triggers such classification.
New Protections for IRS Whistleblowers
The past two years saw the implementation of further enhancements to the whistleblower program, including the statutory anti-retaliation provisions extending employment protections, new administrative guidance on communications requirements for status updates and inquiries, and the implementation of the GAO’s 2018 audit recommendation to modify Form 11369 (Confidential Evaluation Report on Claim for Award). (See our August 2019 post, Promising Changes to IRS Whistleblower Program – Tax Whistleblowers Now Protected Against Retaliation and Improved Communication when Reporting Tax Violations)
First, the problematic lack of anti-retaliation protections for tax whistleblowers prior to 2019 was framed by Sen. Chuck Grassley (R-Iowa) as, “The IRS needs to put out the welcome mat for tax fraud whistleblowers, not treat them like skunks at a picnic.” The stink has now been statutorily neutralized. The enaction of whistleblower anti-retaliation protections, codified in the Taxpayer First Act (2019), should provide comfort to potential whistleblowers who hesitated to come forward with valuable information due to concerns about financial and professional repercussions.
Additionally, The IRS issued new administrative guidance to its employees, which now requires notification to whistleblowers when their provided information has been referred for audit or examination, as well as when the taxpayer identified by the whistleblower has made a tax payment related to the whistleblower’s information. Upon written request, the IRS will provide information on the claim’s status and stage, or action related to such information, and the reasoning for an award determination for the whistleblower’s claim.
And finally, Form 11369, which provides the data used to determine award amounts for whistleblowers, has been updated to include details on the usefulness of the whistleblower’s information when determining the award. Information on foreign bank account reporting (FBAR) violations–which penalties are now included in the calculation of a whistleblower’s award–are now included on the revised form. (FBAR penalties were added to the award calculation in early 2018, but the form was not updated and published until 2019.)
Outlook for IRS Whistleblowers
The takeaway from this year’s report is that the IRS Whistleblower Office continues to evolve to ensure greater process transparency and communication and enforce whistleblower protections – a welcome development for IRS whistleblowers and their attorneys. While the IRS faces staffing and budget cutbacks, it is encouraging that the reach of the program and its payouts show few signs of slowing or diminishing.
- IRS Whistleblower Program
- How to Become an IRS Whistleblower: Answers to Common Questions from Prospective IRS Whistleblowers
- Tax Fraud and Violations: Examples of the types of tax fraud that can give rise to claims under the IRS Whistleblower Program
- Recent Tax Enforcement Actions
- The Constantine Cannon Whistleblower Team
- Contact us for a confidential consultation