According to recently released data from the federal government, the Internal Revenue Service paid a record setting $125.4 million to whistleblowers in 2012. The total includes an especially massive payout to a former employee of UBS, a Swiss bank that found itself in the IRS' crosshairs last year.
Though the IRS has been faulted for the way it manages its whistleblower program, the recent statistics indicate a good year for the agency. Critics have said that the agency moves much too slowly and that it has put relatively little resources into publicizing and pushing the program. These critics claim the way the program has been mismanaged has led many whistleblowers to avoid contacting the IRS, resulting in the potential loss of millions in uncollected taxes.
The report showed the number of new whistleblower reports increased last year from 314 in 2011 to 332 in 2012. Though the increase was seen as a good sign, it still pales in comparison to the all time high of 472 individual reports witnessed in 2009.
The new numbers reveal a staggering increase in award money distributed in 2012. The $125 million contrasts with only $8 million awarded in 2011. The IRS also reported a steep increase in the amount of unpaid taxes it collected as a result of tips from whistleblowers. In 2011, $48 million was collected because of such reporting and in 2012, that figure jumped to $592.5 million.
It's important to keep the numbers in some kind of perspective. Though there was a tremendous increase in award payments, the vast majority of that increase was due to one especially large award. Bradley Birkenfeld, a former UBS private wealth banker, came forward and revealed that he helped wealthy Americans hide millions of dollars in secret Swiss accounts to avoid detection by the IRS. The IRS paid Birkenfeld $104 million, or all but $21 million of last year's award money.
The IRS currently operates two whistleblower programs. One, dealing with small-awards, is for those cases involving less than $2 million of tax money. For such cases the award percentage is capped at 15%. The second program, for large awards, is more generous. For those cases with more than $2 million in tax money, the reward amount can increase to as much as 30%. Last year three payments were made under this large-award system, one of which was to Birkenfeld. In a recent letter, Senator Chuck Grassley was especially unhappy to read in the IRS report that numbers indicate that payments made under the large-award program are not projected to grow in 2013. Grassley called news of this plateau alarming, given how important such big cases can be.
One bit of especially troubling news contained in the report, something that Senator Chuck Grassley has faulted the agency for in the past, is processing time. The IRS said that the average number of days it spent evaluating an award increased to 1,141. That staggering figure compares to an average time of 285 days seen in 2011.
Sources:
IRS Paid Record $125 Million to Whistleblowers in 2012: Report by Nanette Byrnes, published at News.Yahoo.com on February 13, 2013.
IRS Releases 2012 Whistleblower Report by Laura Saunders, published at WSJ.com on February 20, 2013.
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