Iowa Senator Charles Grassley sent another letter concerning the inept operations of the Internal Revenue Service Whistleblower Program, this time to President Obama's nominee to run the IRS, John Koskinen. Grassley, who serves as Senior Member of the Senate Finance Committee, says that dramatic action needs to be taken to salvage the program from irreparable harm.
Though the IRS whistleblower program has had some notable success, its failures tend to predominate. In an astounding regulatory coup the whistleblower program run by the IRS managed to attract Bradley Birkenfeld (who we've discussed several times before). Birkenfeld ultimately blew the whistle on UBS and other banks that were hiding American money overseas in an attempt to avoid taxation. As a result, Birkenfeld walked away with a whopping $104 million share of the case.
Grassley appears all too aware that Birkenfeld's case is an outlier and represents an exception far more than a rule. The problem is that the whistleblower program, much like the rest of the IRS, is in disarray and in need of a substantial reorganization. Grassley's letter to the new IRS Commission serves as a warning of some of these problems and is meant to prompt Koskinen to take action to remedy some of the issues.
One of the first things Grassley points out is that payouts by the IRS as part of the whistleblower program are few and far between. Despite huge amounts of information, IRS agents appear hesitant to pursue potentially lucrative leads against tax cheats. One case exemplifies this hesitation, with the IRS doing little to bring in potentially $200 million in revenue that a tax attorney, William Cooper, claims he has evidence was illegally kept from the IRS by individuals who failed to pay required estate taxes. Rather than run with the case, Cooper has had to bring suit against the IRS to try and force them into action.
Grassley points out that the vast majority of whistleblowers will not be willing to go to such extreme efforts and that the IRS ought to be leading the way on such cases rather than having to be drug kicking and screaming. Given that President Obama has made increasing tax revenues a priority, Grassley points out how important it is to create and maintain a robust whistleblower office within the IRS.
Grassley also makes clear that the government has an obligation to try and collect the billions of dollars in tax revenues that go unpaid every year before it attempts to raise taxes on the million of Americans who follow the law. Thankfully there does not appear to be a shortage of tips to the IRS whistleblower program, just a shortage of action on the IRS's part. However, Grassley wisely warns that this may not last forever. If people begin to get frustrated with the IRS's lack of action then it will only be a matter of time before the tips stop coming in.
Sources:
Grassley Blows Whistle On IRS Whistleblower Program by Robert W. Wood, published at Forbes.com, September 30, 2013
IRS To Whistleblowers: "Thanks, But We're Withholding!" by Robert W. Wood, published at Forbes.com. May 19, 2011
September 26, 2013 Letter To John A. Koskinen by Charles Grassley, published at Grassley.Senate.gov on September 26, 2013.
See Our Related Blog Posts:
SEC Whistleblower Program Up And Running But Paying Out Little
Impact of Sequestration on IRS Whistleblower Program
