IRS FY 2014 Whistleblower Program Report to Congress
During its 2014 fiscal year (“FY 2014”) the IRS Whistleblower Office received more claim submissions than any other year. The number of claims made in FY 2014 increased by about 26.8% from 2013. The program continues to move forward with its goals of expanding the program’s reach and improving communications with existing and future whistleblowers.
Whistleblower Program Background
Significant changes in the IRS whistleblower award program were brought about by The Tax Relief and Health Care Act of 2006 (“Act”). The purpose of the Act was to encourages people with knowledge of tax noncompliance activity to report their findings to the IRS. These individuals will then be awarded based on the percentage of the collection proceeds.
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 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) applies 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.
The IRS generally will not pay out awards until approximately five to seven years after the initial claim has been filed. This is a result of the extensive process involved with taxpayers exhausting all appeals and allowing for all statutory periods to have expired or been waived. The first claims to be paid under the 2006 amendments were in FY 2011.
Report Highlights
Staffing
- The Whistleblower Office staff hired 3 new senior analysts during FY 2014 for a total of 43 staff members, 20 of whom are senior analysts.
Program Guidance
- On August 12, 2014, final regulations were published in the Federal Register to clarify and provide guidance for whistleblower submissions, including submitting information regarding tax underpayments or violations, filing claims for award, and the whistleblowers administrative proceedings applicable for award under IRC §7623.
- The Deputy Commissioner for Services and Enforcement issued a memorandum on August 20, 2014 highlighting the value of whistleblower information, the importance of timely evaluation of that information, and the need to protect whistleblower and taxpayer rights.
Program Operations
- The Whistleblower Office determines if the 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).
- Claims received increased from 10,520 in FY 2013 to 14,365 in FY 2014 with a substantial increase in open claims from 5,101 in FY 2013 to 8,682 in FY 2014.
- Claims received in FY 2014 and FY 2013 accounted for 80% of closures of whistleblower claims. The most common reasons for denial were non-specific allegations, issues that were below the threshold for IRS action, and allegations that did not identify a tax issue.
- The IRS made 101 awards totaling over $52 million in FY 2014, which is consistent with the prior year. By the end of FY 2014 eleven claims have been paid, including two separate payments to one whistleblower.
Outreach and Communications
- There IRS website, www.irs.gov, includes an information page which contains information about the purpose of the whistleblower program, how to make a submission and what to expect after making a submission. Also, on the website, there is a link to Form 211, Application for Award for Original Information, which individuals use to submit a claim.
- The Whistleblower office has been making significant efforts to reach out to the general public using some social media sites to try and increase awareness of the program.
Administrative Priorities and Issues
- In FY 2014 the Whistleblower Office began the process of updating the Internal Revenue Manual to reflect the final regulations and is also updating its correspondence, policies and procedures accordingly.
- The President’s FY 2014 Budget submission has created a legislative proposal to provide whistleblowers with protection from retaliation.
Tax-Exempt Organizations
Tax-exempt organizations should continue to utilize IRS Form 13909, Tax-Exempt Organization Complaint (Referral) Form, to report whistleblower submissions; however, the regulations provide comprehensive guidelines with respect to the process and awards associated with the program.
As noted on Form 13909, the nature of violations (note that more than one could apply) include, but are not limited to, the following:
- Directors/officers/persons are using income/assets for personal gain;
- The organization is engaged in commercial, for-profit business activities;
- The organization is involved in a political campaign; or
- The organization refused to provide a public disclosure copy of its Form 990 to a requester.
If an individual is concerned that he/she may face retribution if their identity is disclosed, they may check the box on Form 13909 to indicate such. Additionally, any individual submitting a whistleblower claim has the option of submitting an “Anonymous” claim in lieu of their actual name.
Additional Resource
Complete copies of Fiscal Year 2014 Report to the Congress and IRS Forms 13909 and 211 can be accessed at the following links:
- Fiscal Year 2014 Report to Congress
- IRS Form 13909
- IRS Form 211
Ask Our Experts
Please contact a member of WS+B’s Healthcare Services Group at [email protected] for further questions or assistance.
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.
