The Internal Revenue Service recently released its annual report to Congress. The report, not known for its stimulating material, contained one area of interest to many, especially critics of the agency: whistleblower tips. The report clearly indicated that the IRS has done almost nothing to follow up on or to encourage additional tips about those who have failed to pay their taxes.
The report revealed that since 2006 when the Tax Relief and Health Act, which authorized the creation of the IRS whistleblower program, was passed only nine awards have been paid to whistleblowers by the IRS. These nine payments represent only a tiny fraction of the thousands of tips sent into the IRS by concerned citizens.
The law that gave birth to the whistleblower program was designed to encourage those with information about tax cheats to come forward by creating a financial incentive. The legislation allows whistleblowers whose tips result in a successful prosecution to receive up to 30 percent of the total amount collected by the IRS. This system is designed to not only collect some of the billions of dollars in uncollected taxes that go unpaid every year, but also to reward those who assisted the IRS in the investigation.
The program has worked on one level, with thousands of tips flooding into the office since it was created nearly eight years ago. However, the IRS has failed to pick up the ball and run with it, ignoring thousands of tips and allowing the whistleblowers to languish in a seemingly permanent state of limbo. This lack of action and payments has reduced the incentive for citizens to continue coming forward with tips, discouraging most people from taking the risk of sticking their necks out when they believe the IRS will do little with the information anyway.
Iowa Senator Chuck Grassley has been a prominent critic of the IRS, especially with regard to its handling of the whistleblower program. Grassley has noted how the agency repeatedly fails to make whistleblower cases a priority, a decision that will invariably lead to a decrease in the number of tips received.
Some say that the source of the problem is that the IRS, as an organization, is resistant to whistleblower-led investigations, preferring to initiate their own cases on their own timelines. Another possible reason for the reluctance to move on whistleblower tips is a desire by some to avoid paying out a share of the award. By ignoring whistleblowers, the IRS can keep 100 percent of the money it wins.
Regardless of the reason, the lack of action is alarming and disheartening. The millions of citizens who pay their taxes every year deserve to have the IRS do everything possible to collect money from those who refuse to pay their fair share.
Report Shows Extreme Inaction into Tax Fraud by IRS, by Juliana Kenny, published at InsideCounsel.com on April 10, 2014.
IRS Cheats Taxpayers By Ignoring Whistleblowers, by Erika Kelton, published at Forbes.com on April 8, 2014.