Congress has passed a key bipartisan IRS reform bill with important improvements to the IRS whistleblower program that needs only President Trump’s signature to become law.
UPDATE: President Trump signed the Taxpayer First Act, with changes in the IRS whistleblower program, into law on July 1, 2019.
The Taxpayer First Act, H.R. 3151, includes provisions that extend greater employment protections to tax whistleblowers and requires the IRS to update whistleblowers on the status of the investigation into their claims.
As Sen. Chuck Grassley (R-IA) noted when he introduced the Senate version of the bill in March of this year, IRS whistleblowers “are often putting their careers on the line exposing corporate tax shelters with no protections should their employer decide to retaliate.”
The Taxpayer First Act would grant IRS whistleblowers robust anti-retaliation provisions similar to those currently offered to whistleblowers under the Sarbanes-Oxley Act and the False Claims Act.
IRS whistleblowers who experience job retaliation – including being fired, demoted, harassed, or having their pay docked – would be able to sue for reinstatement, doubled back pay and further compensation for damages.
A whistleblower could seek relief by first filing a complaint with the US secretary of labor within 180 days of the retaliation, and then pursuing the claim in court if the secretary did not issue a final decision within 180 days of the complaint being filed. The law would also prohibit the enforcement of an agreement that required arbitration of the retaliation claim.
The tax reform bill additionally would allow the IRS in the future to communicate with whistleblowers while their cases are being processed and still protect the privacy of the entities and individuals being investigated. Under existing law, it has been difficult for whistleblowers to learn any information once they submit information to the IRS.
“They often wait for years in the dark with no indication of whether the information they provide will lead to a successful recovery or whether their reward is even being processed,” Grassley said earlier this year.
Specifically, section 1405(a) of the Taxpayer First Act would require the IRS to provide whistleblowers with updates when their cases have been referred for audits or examinations, as well as when their disclosures yield payments from taxpayers.
Under the IRS whistleblower program, whistleblowers may receive 15 percent to 30 percent of the amount the IRS collects as a result of the whistleblowers’ information, if the amount of tax fraud exceeds $2 million. The IRS is required to protect the identities of whistleblowers, but may reveal them in certain, limited cases such as if it is ordered to do so by a court.
The House originally passed a version of the Taxpayer First Act in April, but concerns about a provision unrelated to the whistleblower program – codifying the IRS’s “Free File” program – led House legislators to revise the bill and drop the Free File provision.
Congress passed the updated bill on June 13, 2019. President Trump is expected to sign the Taxpayer First Act into law.
The IRS whistleblower program has long vexed whistleblowers and their attorneys. Phillips & Cohen partner Edward Arens wrote an article exploring some of the problems the IRS whistleblower program faced, as well as possible solutions, for Accounting Today.
Assuming the Taxpayer First Act becomes law, it would be a huge step forward for the IRS whistleblower program.
If you are aware of a tax fraud and would like to consult with our whistleblower attorneys to discuss your case, please contact us for a free, confidential review.