On December 13, 2010, the IRS Whistleblower Office published its annual report to Congress for fiscal year 2009 (PDF). The report revealed that the IRS Whistleblower Office has received a steady stream of information about multi-million dollar tax underpayments over fiscal years 2008 and 2009. The IRS reported receiving 460 submissions relating to 1941 taxpayers in their fiscal year 2009 that meet the criteria for section 7623(b), which is the mandatory award program for multi-million dollar cases. The IRS had previously reported receiving 476 of these submissions relating to 1246 in fiscal year 2008. The report failed to discuss several sensitive issues that have not been resolved internally, are awaiting public guidance, or have been criticized by practitioners.
The report did address an internal change in policy in the timing of payment of award determinations. In the past, the IRS processed the award determination after collecting the unreported tax liabilities discussed in the whistleblower claim. However, as of a July 2009 decision by IRS Chief Counsel’s Office, the IRS is now waiting to making an award determination until after the time the taxpayer has to appeal or seek a refund has passed.
In the report, the IRS notes that it has yet to pay an award under the new program. Stephen Whitlock, Director of the IRS Whistleblower Office, recently stated that he expects the first awards to be paid in 2011. Once the awards start being paid, we believe the floodgates will open and new whistleblower submissions will pour into the IRS. Those who come forward with information early are in a better position to collect an award because award determinations are based in part on when the whistleblower came forward. If someone else beat you to the punch, you may not be entitled to an award at all.
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