In a message that precedes the Annual Report to Congress from the IRS’s Whistleblower Program, its Director Lee D. Martin addressed several key issues, most notably, the need to reduce the lifecycle of whistleblower claims. While praising the results of the program in terms of tax collections, the Director saw fit to address a problem many whistleblowers have encountered when reporting unlawful conduct by US taxpayers.
According to the report, Fiscal Year 2015 was a “big year” in terms of whistleblower awards, with 99 awards granted, which added up to a total of $103 million before sequestration. Notwithstanding, the office reports to have received 17% less claims than in the previous year. While the number of claims may have been reduced, the number of closed claims rose by 27%, reaching 10,615 in 2015.
Internal Revenue Service Whistleblowers Paid $403M 2007 to 2015
That the program is an important instrument for the IRS is out of question. Since its inception in 2007, the whistleblower program has been responsible for the collection of over $3 billion in tax revenue. The whistleblowers who have assisted the IRS through the program have been awarded a total of $403 million over the same period.
Besides commenting on the problem of claim lifecycle, the report presents a legislative proposal to better protect whistleblowers from employer retaliation. In his introduction to the report, Martin expressed his concern that many whistleblowers may not be coming forward under the IRS program for fear of such retaliations. Another proposal aims to safeguard taxpayer information, by imposing sanctions on whistleblowers who disclose taxpayer information to which they have obtained access through their whistleblower claims.
The tax administration expects that these legislative proposals will be approved, and that they will succeed in protecting both whistleblowers and taxpayers, creating a safe environment where the claims can be processed efficiently and in a timely manner, an environment that can become increasingly conducive to whistleblowers coming forward with relevant information about taxpayer misconduct in all its forms.
IRS Whistleblower Program in Numbers
The report offers some good news for whistleblowers. For example, the awards paid, as a percentage of amounts collected, were 15.7% in 2013, saw a minimal increase in 2014, reaching 16.9%, and rose substantially in 2015, reaching 20.6%. Of 501 million collected in FY 2015, 103 million were awarded to the whistleblowers who initiated the investigations.
If the awards have increased, when we look at the statistics, claim lifecycle has become one of the critical aspects to improve in 2016. In 2014, the average time to process awards was 4.81 years for 7623(a) claims. In 2015, it became 8.72 years. Naturally, there is a positive and a negative side to these statistics. They mean that more “old” claims were resolved in 2015, but they also pinpoint to a claim lifecycle that may not make the program very attractive. Especially when considering the failing employer retaliation protections, there may not be many willing whistleblowers who can afford to wait eight years to collect their awards.
The number of claims remaining open after FY 2015 was 35,670, roughly 5,500 claims more than at the end of the previous fiscal year. If we consider that the number increased by over 8,000 claims from 2013 to 2014, and that the number of claims opened in 2014 and 2015 either remained stable or increased in comparison with 2013, it is possible to observe a sign of increased efficiency in processing claims.
Naturally, the 8-year wait is still there and the protections from employer retaliation are still insufficient. While there has been a mild progress in terms of encouraging and processing claims over the last couple of fiscal years, the IRS still has a lot of work to do to improve its whistleblower program. Tax-related whistleblower claims have been called “a black hole” in the media, and the IRS Whistleblower Office is reportedly making adjustments to do away with its poor reputation with the whistleblower community.