The Internal Revenue Service released its Whistleblower Report for Fiscal Year 2012, which ended on Sept. 30. The report is required by Congress and shows the annual accounting for the IRS whistleblower program that pays rewards to those people who report or turn in tax frauds.
The IRS whistleblowers office reported that in Fiscal Year 2012, it collected $592.5 million from the whistleblower program, including 12 collections of more than $2 million each. They also paid out 128 whistleblower awards totaling a record $125.4 million.
It was disclosed in August that the 2012 awards included a $104 million payment to Bradley Birkenfeld, the IRS whistleblower who provided evidence that Swiss bank UBS helped several United States taxpayers hide money in Swiss accounts. Although both the recipient and the size of awards are normally kept secret, the IRS whistleblower, Birkenfeld signed a release allowing the IRS to make public both his name and the amount of his payment.
IRS Whistleblower Programs
As required by law, the IRS has two whistleblower programs. The first is the small-awards program. It is for cases involving less than $2 million of tax fraud and the award for IRS whistleblowers can be as high as 15 percent of the money recovered, though it is often times less. The large-awards program is more generous. For cases involving $2 million or more of tax fraud, the reward can be as high as 30 percent of the money the IRS recovers. Last year there were three payments made under the large-awards program, including the whistleblowers award to Birkenfeld.
Some advocates of the IRS whistleblower program were dismayed by the following sentence in the new report: “The number of payments made under the [large-awards] program is not projected to grow dramatically in Fiscal Year 2013.”
Senator Charles Grassley of Iowa, who is a sponsor of the law that created the IRS whistleblower large-awards program, called the leveling off in the number of whistleblowers “alarming.” In a Jan. 28 letter to IRS officials, he also criticized new regulations for the whistleblower program the IRS proposed in December.
In Fiscal Year 2011, the IRS received 314 submissions identifying 734 taxpayers who, based on the content of the information provided, appear to meet the section 7623(b) criteria. In Fiscal Year 2012, the IRS received 332 submissions that identified 671 taxpayers who, based on the submissions, appear to meet the section 7623(b) criteria.
Additional points of interest contained within the report are:
- In FY 2011, the IRS whistleblower program brought in $48 million. In FY 2012, the whistleblower program brought in $592.5 million.
- In FY 2011, the IRS Whistleblower Office paid the first claims under section 7623(b). Five claims have been paid under the revised law. “Taxpayer privacy laws do not permit the publication of data on specific claims.”
- As of Dec 10, 2012, the IRS has received 1,449 submissions from 1,126 whistleblowers providing critical information related to tax fraud on 10,043 taxpayers. The status of each case can be found on pages 9 and 10 of the official Whistleblower Report.
- In January 2012, the Small Business/Self-Employed (SB/SE) Division transferred the Informant Claims Examination (ICE) Unit to the IRS Whistleblower Office. The group of 13 employees is responsible for case management and administration of the whistleblower award program under what is now section 7623(a).
- The IRS whistleblower law does not provide for whistleblower protection. “Unlike other laws that encourage whistleblowers to report information to the government, section 7623 does not prohibit retaliation against the whistleblower.” This information is found on page 14 of the official Whistleblower Report.
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