An IRS whistleblower program that has produced more than $6 billion in payments since 2007 is languishing due to a lack of funding, The Hill’s Tobias Burns reports Wednesday.
The IRS Whistleblower Office rewards people who provide information about tax cheats after the tax agency recovers what it is owed. The rewards vary from 15% to 30% of what is recovered, and according to the program’s most recent annual report, between 2007 and 2021 the program collected $6.39 billion from “non-compliant taxpayers” while paying out $1.05 billion to whistleblowers – a hefty 6-to-1 ratio.
But funding for the program has declined in recent years, along with the amounts of money it has recovered. According to a Senate Finance Committee report, the number of investigations fell from 43 in 2014 to just six in 2020. Revenues have been falling, too, from $1.4 billion in 2018 to $245 million in 2021.
A tool to catch wealthy tax cheats: The whistleblower program is discussed in a recently released report from the Senate Finance Committee that highlights an investigation into allegations that billionaire software executive Robert Brockman concealed approximately $2.7 billion in income from the IRS. In what is the largest tax evasion case brought against an individual in U.S. history, Brockman was indicted, with key evidence in the case coming from a whistleblower.
“Brockman’s scheme may have gone undetected by the IRS and federal prosecutors were it not for evidence provided by a whistleblower and the cooperation of several co-conspirators,” the Senate Finance report says.
The report also notes that Brockman’s elaborate scheme to hide income, which involved lightly regulated offshore bank accounts, may be just the tip of the iceberg – an iceberg the IRS is currently unequipped to explore. An enhanced whistleblower program could help the IRS gain more traction in that battle.
“Congress and Treasury should strengthen the IRS Whistleblower Office and better utilize incentives available for whistleblowers to come forward with information to detect offshore tax evasion,” the Finance Committee recommended. “Whistleblowers can serve as effective partners for the federal government to unpack sophisticated tax evasion schemes used by wealthy taxpayers and large corporations.”
In line for an upgrade: While the IRS is still developing a detailed plan on how to spend the $80 billion in additional funding it will receive over 10 years thanks to the Inflation Reduction Act, the whistleblower program is a likely target for more money and personnel. Lawmakers from both sides of the aisle have lobbied to boost the program, most recently in the 2021 IRS Whistleblower Improvement Act, which was sponsored by both Senate Finance Committee chair Ron Wyden (D-OR) and ranking member Chuck Grassley (R-IA).
“The IRS whistleblower program has been a genuine success for American taxpayers,” Grassley said as he introduced the bill. “We ought to do whatever we can to ensure its continued success, so tax dodgers and fraudsters pay what they owe. Toward this end, it’s vital that whistleblowers who come forward are protected and treated fairly.”