IRS whistleblower program evaluated.

• Author: Dolan, Michael P.

On September 30, 2009, the IRS Whistle-blower Office released its 2009 annual report to Congress outlining claims made under Sec. 7623. In a related action, on October 8, 2009, the Treasury Inspector General for Tax Administration (TIGTA) issued its own evaluation of the IRS's management of the whistleblower program.

The Tax Relief and Health Care Act of 2006, P.L. 109-432, created the IRS Whistleblower Office. This act also amended Sec. 7623 to increase the amount of awards available to whistleblowers who provide information that results in the collection of taxes, penalties, interest, and other qualifying amounts. Congress intended to place a priority on high-dollar cases that would result in significant recovery of federal tax, interest, and penalties. Among other things, these new provisions required the IRS to develop processes to distinguish among whistleblower claims based on the potential amount of taxes the IRS could recover.

New Sec. 7623(b) requires the IRS to pay awards for qualifying information received after December 19, 2006. The information must substantially contribute to the collection of taxes, penalties, interest, and other qualifying amounts when the taxpayer's gross income exceeds $200,000 and the amounts in dispute are more than $2 million. Depending upon the impact of their contribution, whistle-blowers who provide such qualifying information are eligible for an award of at least 15% and up to 30% of the collected proceeds (Sec. 7623(b)(1)). Whistleblower claims that do not meet the gross income and dispute amounts will continue to be processed under Sec. 7623(a), which only requires the IRS to pay an award of the amount it "deems necessary."

In identifying the progress made in implementing these new provisions, the report details actions taken by the IRS. This includes an outline of the creation of a new "intake" process, issuance of Notice 2008-4, revision of Form 211, Application of Award for Original Information, and creation of a Whistleblower Executive Board. The IRS review also summarizes activity levels in FY 2008, reporting that it received 476 whistleblower submissions related to 1,246 taxpayers that appeared to meet the $2 million threshold. According to the report, 228 of the submissions it received alleged underpayment of $10 million or more and 64 alleged underpayment of $100 million or more. Only 8 of the 198 fully paid claims in 2008 involved collections of more than $2 million, and only 3 involved...