IRS Whistleblower: TIGTA Final Audit Report about IRS Whistleblower Program

TIGTA (Treasury Inspector General for Tax Administration) issued their final audit report about Internal Revenue Service's (IRS) Whistleblower Program.

The Whistleblower Program helps IRS recover billions of underreported income as tax with the help of the data supplied by regular informants. The final review of TIGTA addresses deficiencies in the control and the resolution of whistleblower claims on time.

Several years ago, The Internal Revenue Service (IRS) established a similar program called the Informant Rewards Program for detecting tax underpayment. Under this program, the IRS collected an extra $340 million in taxes, penalties and late payment interest during years 2001-2005, and $27 million were paid to US citizens who helped IRS detect those taxpayers breaching the internal revenue law.

In 2006 the Tax Relief and Health Care Act of 2006 was accepted by the U.S. Congress, that made the IRS to establish the Whistleblower Office, offering higher amount of awards for citizens who help IRS detect tax underpayment. The Internal Revenue Service then established the Whistleblower Program, replacing the previous Informant Rewards Program.

The goal of the Tax Relief and Health Care Act of 2006 was aiming attention at situations which will result in collecting larger amount of taxes, recovering multi billion dollars for the Treasury.

Different than the previous program, whistleblowers now would earn between 15%-30% as awards, instead of 8-14% which the previous program offered. The Internal Revenue Code Section 7623(b) gave IRS the opportunity of paying larger amounts of awards, $2 million for a business taxpayer case and $200,000 for an individual case.

In their audit, TIGTA (Treasury Inspector General for Tax Administration) reported that the IRS (Internal Revenue service) saw a noticable increase in those whistleblower cases since the passage of Tax Relief and Health Care Act. In 2008, around US $65 billion is "whistled" as underreported income (based on the declaration of the whistleblowers), 8 times the previous year. TIGTA noted however, there are problems on handling of those claims by the IRS on time and there is a lack of an effective claim control system, which can result in a decrease of the effectiveness of the Whistleblower Program. The IRS granted the suggestions of TIGTA about the Whistleblower Program.

Treasury Inspector General for Tax Administration noted that delays in dealing whistleblower claims are resulting in the payment of the award taking long times, even up to 15 years. Although the Tax Relief and Health Care Act of 2006 is in force for a quite long time, TIGTA noted that no award has been paid out yet on a 7623(b) claim.

One other important issue TIGTA found is that the whistleblowers are concerned about retaliation which may come from employers, and they are worried about their confidence.

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