IRS FY 2015 Whistleblower Program Report to Congress
One of the key initiatives of the IRS during its 2015 fiscal year (“FY 2015”) was to initiate a whistleblower program review to identify opportunities to maximize the efficiency and effectiveness of the claim process. The IRS adopted a new fiscal reporting period, October 1 through September 30. In addition, the IRS will present its findings for each of the preceding three fiscal years.
Significant changes in the IRS Whistleblower Program were brought about by The Tax Relief and Health Care Act of 2006 (“Act”). The purpose of the Act was to encourage those with knowledge of tax noncompliance activity to report findings to the IRS. There is the potential for individuals to receive awards based on the percentage of the collection proceeds.
Whistleblower Program
Internal Revenue Code (“IRC”) §7623(a) originated in 1867. This original law provided that the Secretary had authority “to pay such sums as he deems necessary for detecting and bringing to trial and punishment persons guilty of violating the internal revenue laws or conniving at the same.” Prior to 2006, whistleblower awards were discretionary and determined by IRS policy.
IRC §7623(b) was added by the Act and enacted significant changes in the Whistleblower Program which apply to claims filed after December 20, 2006. The statutory award percentages range from 15% to 30%, with some exceptions; however, there is no limit with respect to potential amounts to be paid under the Whistleblower Program. This law applies to cases that provide information that substantially contribute to the collection of tax, penalties and other amounts that exceed $2,000,000.
Conditions to Qualify
As noted in the Report, if a submission does not meet the criteria for IRC §7623(b) consideration, the IRS may generally consider it for an award under the pre-Act discretionary authority (now IRC §7623(a)). In order to have the opportunity to qualify for the award program under IRC §7623(b), a whistleblower must meet several conditions including the following:
- Signed and submitted under penalties of perjury;
- Relate to a tax noncompliance matter in which the tax, penalties, interest, additions to tax, and additional amounts in dispute exceed $2,000,000; and
- Relate to a taxpayer, and for individual taxpayers only, one whose gross income exceeds $200,000 for at least one of the tax years in question.
The IRS generally does not pay out awards for approximately five to seven years after the initial claim is filed. This is a result of an extensive process involved with taxpayers exhausting all appeals and allowing for all statutory periods to expire or be waived. For example, the first claims to be paid under the 2006 amendments were made in FY 2011.
Report Highlights
The Report includes a section entitled “Program Developments” which includes information on Program Guidance, Operations, Staffing and Outreach & Communications.
Final regulations published in the Federal Register on August 12, 2014 provide clarification and additional guidance for whistleblower submissions made in accordance with IRC §7263(b).
The Whistleblower Office determines whether or not information submitted may contribute to the assessment of unpaid taxes, penalties, interest or collection and then determines whether an award is payable under IRC §7623(a) or §7623(b).
The IRS’ website, www.irs.gov, includes all the information with respect to the Whistleblower Program, how to make a submission and what to expect after making a submission. There is also a link to Form 211, Application for Award for Original Information, which individuals use to submit a claim.
The Report contains six pages dedicated to providing readers with Whistleblower Program statistical results.
Conclusion
The IRS made 99 awards totaling over $103 million in FY 2015; the total award amount represented 20.6% of total amounts collected. By the end of FY 2015, 19 claims had been paid involving 49 IRC §7623(b) claims.
The Whistleblower office has been making significant efforts to reach out to the general public utilizing social media sites to try and increase awareness of the program. In order to receive an outside perspective on the program, the Whistleblower office makes presentations to professional groups to provide insight on program developments.
A copy of the Report can be accessed here:
IRS Whistleblower Program Fiscal Year 2015 Annual Report to the Congress
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The information contained herein is not necessarily all inclusive, does not constitute legal or any other advice, and should not be relied upon without first consulting with appropriate qualified professionals for your individual facts and circumstances.
