The IRS just released its annual report (FY 2020) on the tax whistleblower program. Unfortunately, the award numbers are a significant change from just two years ago – where the IRS reported a ten-fold increase in whistleblower awards to $312 million for FY 2018. For FY 2020 – the amount of (pre-sequestration) awards to whistleblowers was markedly down: $86 million – representing $472 million in dollars collected by the IRS thanks to whistleblowers. Certainly COVID has understandably taken its toll on the work of the IRS, including the IRS Whistleblower Office. But the question is – are these lower award numbers a trend or an aberration? Have whistleblowers seen the mountaintop?
The incoming Biden administration has rung the bell about the need to beef up tax enforcement – and particularly cracking down on big-time tax cheats. The tax whistleblower program certainly punches far above its weight in terms of addressing tax evasion – with Treasury recognizing it as a highly cost-efficient way to go after tax cheats. For example, it’s been long recognized that my client Brad Birkenfeld – by blowing the whistle on UBS and the marked number of Americans with illegal, undeclared bank accounts — caused thousands of wealthy Americans to come clean with the IRS about billions of dollars in undeclared dollars. The power of whistleblowers is undeniable. Any serious effort to go after big-time tax cheats must include the IRS whistleblower program as part of the effort.
To be fair, the current Trump administration – and particularly IRS Commissioner Rettig — have been supportive of the whistleblower program, with the IRS whistleblower office seeing a much-needed increase in staffing. Further, whistleblowers have benefitted from the steady leadership of Lee Martin as Director of the office as well as the dedicated and hard-working staff. In addition, the recently approved increase in overall funding for IRS exam and audit is an important help — too many good whistleblower filings are simply not adequately worked because there are not sufficient resources.
My hope is that the recent staff increases (both at the whistleblower office and the IRS) – coupled with a hopeful end in sight to COVID – will help bring us back to where revenues collected thanks to whistleblowers is back north of a billion dollars (it was $1.44 billion in 2018). However, the new administration can do much to send a signal that it supports the tax whistleblower program and the fight against tax evasion.
The new administration should make a priority of cutting through the red tape that is causing untoward delays in awards (now north of 10 years on average! – supporting partial awards would be a good first step). Also, making sure that IRS Office of Chief Counsel recognizes the long-term value of a robust whistleblower program and is helping find ways to say “yes” to whistleblower awards. Further, the delay in issuing awards for cases that have been remanded by the Tax Court is blinking – set deadlines should be imposed for decisions and awards. The new administration should also work with Congress, especially my old boss Senator Grassley, in implementing commonsense reforms (advocated by the National Whistleblower Center) to improve and strengthen the whistleblower program. Lastly, just using the bully pulpit of encouraging tax whistleblowers to come forward – and directing IRS examiners and agents to make a priority of working with whistleblowers – will go far in strengthening a culture at the IRS supportive of tax whistleblowers.
While whistleblowers may be understandably disheartened by the latest report, I can say that the program does continue to offer good news – as I have seen first-hand. I am certainly honored to have represented (along with my cocounsel Steve Kohn of KKC law firm in most cases) whistleblowers who received a bit under $40 million in awards issued by the IRS whistleblower office of the $86 million in awards this year. The IRS still has a welcome mat for whistleblowers – but it is critical to make a good filing (current information, real dollars, documentation, inside information, specific taxpayer, specific violation of tax laws, are all plusses) – to give yourself the best chance at getting a hard look from the IRS. My hope is next year tax whistleblowers will again see the view from the mountaintop.
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