While the director of the IRS Whistleblower Office has given his program good reviews in the latest annual report about the IRS whistleblower program, the reality isn’t so positive.
In the FY2016 annual report for Congress, IRS Whistleblower Office Director Lee D. Martin noted that the IRS paid 418 whistleblower awards in FY2016, compared to 99 awards in FY2015. Those awards totaled more than $61 million. The number of claims also increased, showing an increased public awareness about the program.
But that good news has a flip side: The amount of whistleblower awards for 2016 ($61 million) – was less than two-thirds of the total whistleblower award amount for 2015 ($103 million).
The IRS also says it “fully addressed or eliminated” its backlog of claims and is using an improved system to more efficiently wade through claims and better communicate with whistleblowers.
However, when you dig a little deeper, there are still familiar problems miring the IRS Whistleblower program.
For instance, the IRS continues to take a narrow interpretation of the laws that govern its whistleblower program. This can lead to rejected whistleblower awards that should have been granted or significantly reduced whistleblower awards when larger ones were justified.
For example, the whistleblower program report says that of the 21,124 claims that were “closed” in FY2016, 65 percent were closed because allegations were “not specific, credible or speculative in nature” or because the IRS already knew about the allegations, which disqualifies a whistleblower from an award. Of that total, 761 (4 percent) were closed because an award was paid in full.
What the report doesn’t discuss is the problem with many rejections. The IRS’s reasons rejecting whistleblower claims often are highly subjective and open to debate. The IRS can even reject an award if it determines it could have discovered the information on its own, regardless of whether the IRS had no knowledge of the fraud before the whistleblower came forward.
Another aggravating problem with the program that hasn’t changed is the time it takes for whistleblower claims to be processed. In FY2016, it took an average of more than 7.24 years for claims related to paid awards to be processed. That is slightly down from FY2015’s 7.37 years average, but it’s still far too long. Adding to this frustration is that this long wait often comes with little or no communication between the IRS and the whistleblower or the whistleblower’s lawyer.
Despite the report’s optimistic conclusions, the IRS still needs to make significant changes if it truly wants to give taxpayers the benefits of an effective whistleblower program and continue to encourage whistleblowers to step forward.