On February 15, the U.S. Senate Finance Committee held a confirmation hearing for Daniel Werfel, President Biden’s nominee to be the Commissioner of the Internal Revenue Service (IRS). During the hearing, Senator Chuck Grassley (R-IA) raised concerns about recent issues plaguing the IRS Whistleblower Program, which prompted Werfel to state that he would look into those issues and find ways to strengthen the program.
The IRS Whistleblower Program offers monetary awards and anti-retaliation protections to individuals reporting tax fraud to the U.S. government. The program revolutionized the U.S.’s tax enforcement efforts. Since 2006 the IRS has awarded whistleblowers over $1 billion based on the collection of over $6.4 billion in back taxes, interest, penalties, and criminal fines and sanctions.
Over the past few years, however, the program has been plagued by a number of issues leading to calls for reforms from whistleblower advocates. Grassley, who led the charge to establish the IRS Whistleblower Program, raised a number of these issues during Werfel’s confirmation hearing.
“In recent years, awards to whistleblowers have fallen while processing times have increased,” Grassley stated “The average time for processing whistleblower claims is now 11 years and I think that’s unacceptable.”
“If confirmed, what steps would you take to ensure well-functioning whistleblower programs so we can bring in a lot more than $6.4 billion,” Grassley asked Werfel.
Werfel replied that he views the whistleblower process as critical to accountability within the IRS. “You mentioned some statistics that are concerning about the potential functionality of that process,” he stated. “I will look into it and figure out what corrective actions may be necessary to strengthen it.”
Following Werfel’s response, Senator Ron Wyden (D-OR), Chair of the Committee, chimed in to state: “Senator Grassley, I just want for people to know how important this work is that you’re talking about and you and I have been working on these whistleblower issues for a long time and that will continue here.”
“The IRS whistleblower program is critical to ensuring that illegal offshore accounts held by criminals and tax evading millionaires are busted. The program desperately needs strong support from the top,” said whistleblower attorney Stephen M. Kohn of Kohn, Kohn & Colapinto.
“This testimony is a good first step, but we must closely follow-up and make sure that the program is properly supported,” continued Kohn, who represented the leading Swiss whistleblowers who exposed billions in illegal offshore accounts from multiple banks, including Bradley Birkenfeld who obtained a historic $104 million award from the IRS.
Senators Grassley and Wyden introduced the IRS Whistleblower Program Improvement Act of 2021, which offers seven simple reforms to the program in order to reestablish its efficacy and get it back on track. Among the seven reforms, the bill provides for de novo review of whistleblower decisions in Tax Court and imposes interest on whistleblower awards that are subject to significant delay.
Further Reading:
The IRS Whistleblower Program is in Even Worse Shape than We Thought