On June 24, the Internal Revenue Service (IRS) Office of the Whistleblower released its Annual Report for the 2023 Fiscal Year. During FY 2023, the IRS Whistleblower Program awarded $88.7 million to whistleblowers based on the $337 million the agency was able to collect thanks to whistleblower disclosures.
“The IRS appreciates the valuable assistance it has received from whistleblowers and the tremendous support the whistleblower practitioner community provides to the IRS Whistleblower Program,” wrote IRS Whistleblower Director John Hinman in the report. “Whistleblower information that the IRS can act on is an important component of effective tax administration as it bolsters the fair and effective enforcement of our nation’s tax laws, the success of our voluntary tax system, and our efforts to reduce the tax gap.”
The $88.7 million awarded in FY 2023 more than doubles the $37 million awarded in FY 2022. The figure still falls short of the $312 million awarded in FY 2018, however. `Furthermore, the total amount of awards issued fell from 132 in FY 2022 to 121 in FY 2023.
“The good news from this report for whistleblowers is the big increase in awards – $88 million up from the previous year of $37.8 million. And the good news for honest taxpayers – the whistleblower program brought in $338 million in revenue,” said Dean Zerbe, a senior advisor at the National Whistleblower Center and a partner at the tax whistleblower firm of Zerbe, Miller, Fingeret, Frank & Jadav. “Congratulations to Director John Hinman and his team for these good results.”
“The report highlights the reform efforts of the IRS to encourage and identify better whistleblower submissions – actionable submissions,” Zerbe added. “The IRS is clearly interested in hearing from whistleblowers with detailed information about significant, recent, and current tax evasion regarding high-wealth individuals, complicated partnerships, overseas accounts, and large businesses.”
However, the report also contains bad news according to whistleblower advocates. The time taken to process mandatory awards is up to an average of 11.29 years and there is a total backlog of 30,135 cases.
“The whistleblower community welcomes the new Director of the Whistleblower Office John Hinman’s efforts to “transform” the program by adding staff and improving management systems,” said Stephen M. Kohn, Chairman of National Whistleblower Center and founding partner at the whistleblower law firm of Kohn, Kohn and Colapinto.
“However, Congress needs to immediately pass the bipartisan IRS Whistleblower Improvement Act, a bill that is necessary to make the program work,” Kohn continued. “The good faith and hard work of the professionals who staff the Whistleblower Office can only go so far in improving the unacceptable backlog. Congress needs to fix the laws that have stifled whistleblowers and undercut the tremendous potential of the Office.”
“The fact that it takes an average of 11.26 years to process the payment of a mandatory whistleblower award, combined with the Office’s acknowledgment that there is a backlog of over 30,000 cases, speaks for itself. Legislative reforms are needed, and the bipartisan IRS Whistleblower Improvement Act should be an immediate priority within the Congress,” Kohn added.
In March 2023, a bipartisan group of Senators introduced the IRS Whistleblower Improvement Act which makes a number of technical reforms to the IRS Whistleblower Program.
The six reforms include:
- Provide for De Novo review in appeals heard by the U.S. Tax Court, allowing for new evidence to be admitted to the record
- Establish a presumption of anonymity for whistleblowers before the court
- Exempt whistleblower awards from budget sequestration
- Provide that interest be paid to awardees if the whistleblower award has not been paid within one year of the IRS collecting all proceeds
- Bring the tax treatment of attorney’s fees into line with other whistleblower programs
- Improve the program’s annual report to Congress to help tax writers identify areas in most need of attention
In March, National Whistleblower Center (NWC) sent a letter to Senator Mike Crapo (R-ID) Ranking Member of the Senate Finance Committee urging him to support the inclusion of the whistleblower reform bill as a part of the Tax Relief for American Families and Workers Act of 2024, the large bipartisan tax bill currently being negotiated in Congress.
NWC has published an Action Alert allowing whistleblower supporters to write to Congress calling for the passage of the IRS Whistleblower Improvement Act.
Join NWC in Taking Action:
Further Reading:
IRS Whistleblower Program Releases Annual Report
Bipartisan Bill Offers Critically-Needed Reforms to IRS Whistleblower Program
