GAO: Problems Persist with IRS Whistleblower Program
A recent study of the IRS Whistleblower Program by the US Government Accountability Office (GAO) indicates a range of problems that renders the program a weaker toot than it should have.
Entitled IRS Whistleblower Program: Billions Collected but Timeliness and Communication Concerns May Discourage Whistleblowers, the study spotlights a gamut of issues, such as yearslong delays in processing claims, inadequate use of what's available to manage claims, over- and underpayment of awards, missing data, and insufficient protection of whistleblowers and the information they provide.
The IRS Whistleblower Office is charged with handling thousands of tax whistleblower claims every year for two programs: 7623(a) for whistleblower claims of up to $2 million and 7623(b) for claims of more than $2 million. The program began in 2007.
Since fiscal year 2011, tax whistleblowers who report on the underpayment of taxes by others have helped the IRS collect nearly $2 billion in additional revenue. Under the program, qualifying whistleblowers are paid a minimum of 15 percent of the collected proceeds.
From 2011 to June 30 of this year, $315 million was awarded to whistleblowers for 500 claims â 483 for 7623(a) claims and 17 for 7623(b) claims.
But the GAO's review of the 17 larger awards indicated over- and underpayments of about $100,000. Although the IRS Whistleblower Office began verifying the collected proceeds before awarding payments, the office didn't document that verification process, âputting it at risk of making additional errors in award payments,â according to the study.
âWe appreciate your robust review of this IRS program,â said John Dalrymple, IRS deputy commissioner for services and enforcement, in an October letter to James McTigue Jr., the GAO's director of tax issues for the Strategic Issues Team. âThe inefficiencies that you identified with the whistleblower claim process are ones that we had previously identified, and they are part of what led us to take action to strengthen this program. Your report findings further confirm for us the existence of efficiency-improvement opportunities, and your recommendations are timely and insightful and will assist us in making progress in our re-engineering of the whistleblower claim process.â
The following are some of the GAO's other findings.
- The Whistleblower Office lacked controls for sending mail and at least once sent âsensitiveâ mail to an incorrect address that also indicated the office's return address, which could threaten whistleblowers' identities. The Whistleblower Office has changed how it labels return addresses, but hasn't documented this policy.
- Whistleblowers are not protected by law against employer retaliation. The study recommends congressional action to provide legislative protection.
- E-TRAK, the whistleblower claims management information system, tracks the progress of claims and stores information. Prior problems were found in the system's ability to monitor claims and produce management reports. The IRS has said the system wasn't intended to monitor overall program performance. Despite updates, the IRS says the system still is difficult to use.
- The GAO's exam of the 17 paid 7623(b) claims as of June 30 indicated that the claims took from four to 7.5 years, from the award application to payment.
- Few claims close with an award payment. Between FY 2013 and Aug. 5, less than 5 percent of 7623(a) and 7623(b) claims closed with an award. During that time, 19,757 claims were closed without any payment.
- The Whistleblower Office has increased its staff levels since 2007, but the increases haven't kept up with the workload. More than 11,000 cases are backlogged.
- The Whistleblower Office doesn't monitor a key date in calculating awards, which causes delays in payment and ineffective management.
Dalrymple indicated that the agency has added staff from other divisions to handle the claims backlog, is exploring ways to streamline operating processes and improve technology, assigned a senior manager from his office to work on re-engineering the whistleblower claim process, and brought in a new manager in August to direct the program.
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Terry Sheridan is an award-winning journalist who has covered real estate, mortgage finance, health care, insurance, personal finance, and accounting and taxation issues for newspapers, magazines, and websites. A Chicago native and former South Florida resident, she now lives in New England.