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Improvements to the IRS Whistleblower Program Signed Into Law

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On July 1, 2019, President Trump signed into law the Taxpayer First Act, which was an effort by Congress to “redesign” the Internal Revenue Service. According to the IRS, the law aims to “strengthen taxpayer rights” and requires the agency to “develop a comprehensive customer service strategy.” Among other changes, the Taxpayer First Act enhances the IRS Whistleblower Program.

Under the IRS Whistleblower Program, a whistleblower may report to the IRS a taxpayer’s underpayment of taxes. If the IRS proceeds with an administrative or judicial proceeding against the taxpayer, the IRS may grant the whistleblower an award of between 15 and 30 percent of the proceeds collected. Where the whistleblower’s information is publicly disclosed, and the whistleblower is not the “original source” of that information, the award may be capped at 10%. Note that the IRS Whistleblower Program applies only when the unpaid tax (plus penalties and interest) exceeds $2 million.

Prior to the Taxpayer First Act, the IRS Whistleblower Program was a bit of a black box. Whistleblowers would submit information and the IRS would acknowledge receipt. Beyond that, whistleblowers often had little or no contact with IRS investigators. In introducing Taxpayer First Act in the Senate earlier this year, Senator Chuck Grassley – who authored the original statute establishing the IRS Whistleblower Program – noted that “too often IRS whistleblowers continue to be treated like a skunk at a picnic.” This is because whistleblowers, in Senator Grassley’s words, “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.”

Under the Taxpayer First Act, however, the IRS is now required to give whistleblowers updates on a case. Notice to the whistleblower is automatic when the IRS refers the matter for an audit or when the taxpayer pays a portion of the unpaid taxes, penalties, and interest. In addition, the whistleblower may now request status updates, so long as the request is made in writing.

The Taxpayer First Act also adds an anti-retaliation provision. The act makes it unlawful for a whistleblower’s employer to “discharge, demote, suspend, threaten, harass, or in any other manner discriminate” against the whistleblower for providing information to the IRS. The provision also covers information the whistleblower might give to the Treasury Department, the Department of Justice, or Congress regarding non-payment of taxes. A whistleblower who suffers retaliation must first file a complaint with the Secretary of Labor within 180 days of the employer’s unlawful action. If the Secretary of Labor does not reach a final decision within 180 days, then the whistleblower can file a lawsuit against his or her employer in federal court. If successful at trial, the whistleblower can obtain reinstatement into his or her position, double back pay, lost benefits, and compensation for any “special damages,” including attorney’s fees and court costs.

If you have information about a taxpayer evading payment of taxes in excess of $2 million, give us a call to discuss the matter. We have the experience to review your claim and evaluate whether you have a viable IRS whistleblower claim.

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