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GAO Finds Widespread Problems In The IRS Whistleblower Program

Posted  December 3, 2015

By the C|C Whistleblower Lawyer Team

Since 2011, the IRS whistleblower office has collected almost two billion in unpaid taxes and has awarded over $315 million to whistleblowers.  The apparent success of the program, however, is tempered by widespread problems in the timeliness and accuracy of providing awards, the lack of clear communication and claim review procedures, and a failure to provide protections against retaliation.  The Government Accountability Office conducted an in-depth study of the program and found several areas in which the IRS needs to improve or risk discouraging the thousands of whistleblowers who come forward each year.

In its report, the GAO makes several recommendations to tighten up the IRS’s processes, including: better tracking and monitoring of key dates in its claim management system to ensure the review process does not drag on unnecessarily; strengthening and documenting procedures for award payments to ensure accuracy and timeliness of awards;  improving communications with whistleblowers so that whistleblowers know better where their claims stand and are able to assist in the investigative process; and including whistleblower protections akin to the False Claims and Dodd-Frank Acts.

One of the more important recommendations concerns the IRS’s failure to include whistleblowers in the investigative process through its reticence in executing cooperation agreements.  Given the sensitivity of tax information, the IRS has a policy to provide whistleblowers updates on a claim’s status limited to whether the claim is still open, which means whistleblowers may not hear anything from the IRS for several years.  This also means whistleblowers have no opportunity to provide the IRS with helpful information during the review period.  The GAO noted that, under 6103(n) of the Internal Revenue Code, the IRS has the authority execute cooperation agreements that would permit the IRS to include whistleblowers in the process.  These agreements would have several benefits to the program, including allowing whistleblowers to provide the IRS with free help in analyzing complex tax issues and allowing whistleblowers to share helpful information with the IRS, such as a taxpayer fabricating documentation during an examination.

The GAO also highlights one of the key flaws in the IRS whistleblower program: tax whistleblowers have no statutory protections against retaliation from employers. The GAO spoke with several whistleblowers who said they had suffered negative consequences at work – from being denied a promotion to being demoted – based on their whistleblower status.  The report noted that legal protections are critical to encourage people with high-value inside information to come forward and urged Congress to consider introducing legislation that would provide whistleblowers with legal protections.

Whistleblowers need to have confidence in the program in order for it to be successful.  The recommendations outlined by the GAO directly address many of the program’s flaws.  According to the report, the IRS has agreed with several of the recommendations and is hard at work implementing them in an effort to strengthen the program.

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