Tax whistleblower protection provisions in Senate bill could be boon for IRS program

The proposal would create anti-retaliation measures similar to other whistleblower programs.

The proposal would put in place anti-retaliation measures for IRS whistleblowers similar to those in other whistleblower programs. (Photo via Flickr)

UPDATE: The Taxpayer Protection Act of 2016 was enacted and includes anti-retaliation protection for tax whistleblowers and requirements for improved communication between the IRS and whistleblowers.

April 28, 2016 – A lack of job protection for whistleblowers has been a major flaw in the IRS whistleblower program. But that might be about to change.

The Senate Finance Committee approved on April 20 a proposal by Sen. Chuck Grassley (R-Iowa) that would provide a way for IRS whistleblowers to fight back if they are retaliated against for filing a claim.

The committee also approved a proposal that would require the IRS to notify whistleblowers of their claims’ status and allow the IRS to communicate more freely with whistleblowers assisting an investigation. This addresses an issue whistleblower lawyers have been pleading with the agency to fix for years.

Finance Committee approval allows these provisions to move forward through the legislative process as part of the Taxpayer Protection Act of 2016.

“The IRS needs to put out the welcome mat for tax fraud whistleblowers, not treat them like skunks at a picnic,” Grassley said. “With congressional oversight, the IRS has done a better job of whistleblower treatment than before but it still needs to communicate more with whistleblowers.”

The proposed anti-retaliation provision would protect tax whistleblowers by providing for some combination of reinstatement, back pay plus interest and compensation for other special damages.

These provisions would function similarly to those anti-retaliation provisions of the False Claims Act or the Sarbanes-Oxley Act, albeit with a few key differences. Whistleblowers alleging retaliation would have 180 days after the violation to file a complaint with the Secretary of Labor. If the Secretary did not issue a final decision within another 180 days, the whistleblower then would be able to bring a civil action.

Given the harsh consequences that whistleblowers face – including demotion, firing, harassment and being shut out of their chosen industries – the IRS Whistleblower Program’s lack of anti-retaliation provisions thus far has been a glaring omission.

Whistleblowers who otherwise might come forward with valuable information that could lead to recoveries of taxpayer money may stay silent out of fear of repercussions. If the Taxpayer Protection Act passes as amended, the anti-retaliation provision would make the IRS whistleblower program more effective and bring it into line with other major whistleblower statutes. Requiring improved communication with whistleblowers also would send an important message that whistleblowers are welcome.

Whistleblowers have helped the IRS collect $3 billion in taxes since 2007. So much more is possible.

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