The Internal Revenue Service will review its tax whistle-blower program to improve its backlog and working practices, after the program came under fire from politicians and lawyers.
The IRS will work with “internal and external stakeholders” on a “comprehensive review” of the agency’s guidelines and procedures for handling whistle-blower complaints, Deputy Commissioner for Services and Enforcement Steven T. Miller said in a two-page memo to senior IRS officials posted on the agency’s website yesterday.
Miller also set 90-day deadlines for the agency to review whistle-blower claims, which can take at least seven years to resolve.
The IRS whistle-blower program was created by Congress in 2006 to boost tax revenue by rewarding tipsters for information. Instead, it’s become the place where allegations of tax avoidance go to die, Bloomberg reported on June 19.
Over the past five years, more than 1,300 claims have been filed regarding almost 10,000 companies and individuals, alleging tax underpayments of at least $2 million apiece. Just three awards have been paid. Taxpayers annually owe $385 billion more than the IRS is able to collect, the agency has said.
“Whistle-blowers can provide valuable leads and often offer unique insights into taxpayer activity,” Miller wrote. He said timely action is essential and debriefing of whistle-blowers will “be the rule, not the exception.”
Under existing guidelines, IRS agents typically speak to whistle-blowers only once because of concern about divulging confidential information to informers, a procedure the IRS refers to as the “one-bite rule.”
The whistle-blower office and the field agents and criminal investigators to whom it refers cases will each have 90 days to complete initial reviews of cases brought by whistle-blowers, the memo says. When taxes and penalties are collected, tipsters are to be notified within 90 days, so they can claim their rewards.
Internal performance reviews for IRS agents and offices involved in whistle-blower cases will now include information on whether the deadlines were adhered to.
“The IRS does not have a problem attracting whistle-blowers,” Senator Charles Grassley, the Iowa Republican who sponsored the whistle-blower law, wrote to Treasury Secretary Timothy F. Geithner in April. “The IRS’s current problem is processing and compensating whistle-blowers in a timely manner. I am now concerned that whistle-blowers will stop coming forward.”
While advocacy groups applaud the changes, they’re calling for IRS Commissioner Douglas Shulman to voice more support for the whistle-blower office.
“Those are pretty big moves,” said Patrick Burns, a spokesman for Taxpayers Against Fraud, a Washington interest group that promotes IRS reform and encourages whistle-blowers. “The question is when will Commissioner Shulman stand up and speak out in support of the whistle-blower program. Silence speaks very loudly at this point.”