Whistleblower Advocates Call on Congress to Strengthen IRS Tax Whistleblower Program to Combat COVID-19 Related Tax Fraud

In open letters to the Senate Finance Committee and House Committee on Ways and Means, the National Whistleblower Center (NWC) urged the committees to strengthen the IRS Whistleblower Program. The whistleblower advocacy group said yesterday that it is concerned about the massive and unprecedented amount of public funds spent to address the COVID-19 crisis. The NWC Executive Director John Kostyack noted that strengthening the IRS Tax Whistleblower Program, could prevent tax fraud related to COVID-19 and allow for more effective prosecutions. “The IRS Tax Whistleblower Program has been a tremendous success,” said Dean Zerbe, NWC’s Senior Tax Policy Analyst. “However, there is clearly a need for an updating of the law,” he continued.

The NWC says the reforms it recommends “will ensure that the whistleblowers enjoy a real right to judicial review – a critical aspect of any successful whistleblower program; that awards are made promptly and are not subject to sequestration; that whistleblowers are awarded when the IRS proceeds based on their information; that the IRS and IRS whistleblower office are reimbursed for expenses related to the Whistleblower Program; and, that Congress is informed of the top abuses whistleblowers have brought to light by the program.”

The recommended reforms to the IRS Whistleblower Program are:

1. Guaranteeing de novo review of whistleblower awards in Tax Court;
2. Ensuring prompt payment of awards;
3. Ending sequestration of awards;
4. Clarifying reading of “proceeds based on”;
5. Clarifying Tax Court discovery for whistleblowers and improve protection of taxpayer information;
6. Presuming anonymity in Tax Court;
7. Using whistleblower proceeds to fund Whistleblower Office and reimburse expenses; and
8. Including top tax violations in annual whistleblower reports.

In 2019, the IRS Tax Whistleblower Program recovered over $616 million of taxpayer money and awarded over $120 million to whistleblowers. Often praised for its success in fighting tax fraud, critics complain about the length of time it takes to process whistleblower rewards. In 2019, the average time to process awards was 10.31 years. Nonetheless, the program is seen as an essential tool in uncovering schemes that waste or misuse funds, which is especially vital now with huge amounts of taxpayer money earmarked for COVID-19 relief across the U.S.

Read:

• NWC Letter to the Senate Finance Committee
• NWC Letter to the House Committee on Ways and Means