Whistleblowers Are Being Locked Out of the IRS

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Except for the booming payout of $104 million to UBS whistleblower Bradley Birkenfeld, most of the United States Internal Revenue Service (IRS) Whistleblower Program's claims have not elicited any rewards. Senate Finance Committee Senior Member Charles Grassley insists there are numerous whistleblowers with good claims, but few are finding success at the IRS. At an April 2013 hearing about the IRS whistleblower program, lawyers representing whistleblowers argued that the governmental agency repeatedly makes whistleblowers feel unwelcome.

The current program

The IRS may pay whistleblower awards to tipsters who give detailed and credible information that causes the agency to collect taxes, penalties, interest or other amounts from a noncompliant taxpayer. The IRS demands reliable information concerning a significant federal tax issue.  An educated guess about an unimportant subject will not produce an award payment. 

The IRS issues two types of awards. If the taxes, interest and penalties collected from the tip exceed $2 million, the IRS may pay 15 percent to 30 percent of the amount collected. If the case concerns an individual, the taxpayer’s gross income must be more than $200,000. Another award program exists for those who do not meet the threshold dollar amounts of the first program. The maximum award amount is 15 percent of the amount collected up to $10 million.

Advocating changes

Sen. Grassley argues that IRS payouts are infrequent because the agency is too slow in investigating charges and reaching conclusions. He insists that IRS agents are simply not fully utilizing the tips provided. As a result, Sen. Grassley sent a strongly worded letter to President Obama's nominee for IRS Commissioner challenging him to reignite the failing whistleblower program. 

Topics:  IRS, Whistleblower Awards, Whistleblowers

Published In: Labor & Employment Updates, Tax Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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