In a bizarre move demonstrating the impact of the recent sequestration budget cuts, the Internal Revenue Service recently announced that it would be trimming the percentage of money it awards from its whistleblower program.
The sequester cuts have resulted in the loss of $85 billion in spending out of this year's budget and will ultimately lead to a total of $1.2 trillion in cuts over the next 10 years. A variety of government agencies have had their budgets cut as a result, including the IRS. Most agencies would look to find the least impactful ways of cutting the money, after all, that makes the most sense, to cut money in ways that impact your agency and taxpayers in the least harmful way possible.
Sadly, the IRS seems to have taken a different approach. In an attempt to shave money from its budget, the IRS revealed that it's the whistleblower program, which was created as a result of the 2006 passage of the Tax Relief and Health Act, that would suffer. Currently the program awards whistleblowers between 15 and 30 percent of the total amount collected in cases of large-scale tax fraud. The IRS has said that it will reduce these awards by 8.7 percent.
The IRS has yet to provide a rationale for their decision, likely because there is none. In fact, experts say that reducing a whistleblower's award below the statutory minimum of 15 percent would violate the clear terms of the law that created the IRS whistleblower program in the first place. The language of the 2006 Act says that whistleblowers "shall" receive at least 15 percent of the proceeds collected.
Moreover, the cut is bewildering given that sequestration is meant to impact direct spending and discretionary appropriations; whistleblower awards are neither. Instead, awards are paid directly out of the money collected by the IRS. This money is not part of the agency's budget and thus not affected by sequestration cuts. That means there is no budget impact to paying a percentage of collected money to whistleblowers. In fact, paying such awards actually increases the amount of money in the IRS' coffers.
The recent decision makes it seem as if the IRS is going out of its way to dissuade whistleblowers from coming forward with reports of tax fraud. The cut never needed to be made and serves only to keep concerned citizens from coming forward about large-scale tax fraud. It's confusing why an agency whose sole goal is to collect taxes would take a step to undermine a major program designed to encourage an increase in tax collections.
Sources:
IRS Uses The Sequester To Give Whistleblowers Another Kick In The Teeth by Erika Kelton, published at Forbes.com on March 6, 2013.
IRS: The Jester of the Sequester by Adam Resnick, published at HuffingtonPost.com on March 13, 2013.
See Our Related Blog Posts:
Whistleblowers and the IRS
Grassley Follow-up: Letter to Treasury Secretary Geithner and IRS Commissioner Shulman
