It is hardly news that the IRS can be a slow moving, and an often-frustrating agency to work with.  These inefficiencies can discourage potential whistleblowers from coming forward.  In an effort to improve the IRS Whistleblower Program, the GAO conducted a study and has issued its findings in a report suggesting how to improve the IRS’s Whistleblower Program to ensure that the claims are given timely consideration.  The finds in this report should also serve as a warning to those thinking of going to the IRS without representation because of the innumerable pitfalls and the complex procedures (for example, how would one know when their claim was taking an in ordinate amount of time to reach a certain step in the process).  GAO Report GAO-11-683, “TAX WHISTLEBLOWERS – Incomplete Data Hinders IRS’s Ability to Manage Claim Processing Time and Enhance External Communication” takes a hard look at the IRS’s Whistleblower program, noting that the Whistle blower program suffers a lack of complete data made it hard to evaluate the whistleblower program and a failure to adequately communicate with whistleblowers and the public.  Scott Knott and Greg Lynam, Tax Partners at The Ferraro Law Firm and contributors to this blog, were interviewed for the GAO report late last year and then again earlier this year as part of their review of the IRS Whistleblower Program as the prepared this report. 

The report noted that whistleblower claims often languish in various stages of review.  Of the claims that were submitted in fiscal years 2007 through 2009, 192 claims continue to languish, waiting for review by an operating division Subject Matter Expert to decide if the claim is worth further investigation for more than two years.  The length of time it takes the IRS to determine if it wants to move forward with the information is a point frustration for whistleblowers and their attorneys.  Greg was quoted by Laura Saunders of The Wall Street Journal in “IRS Whistleblower Program Faulted” as saying:

The IRS shouldn’t take three years to determine if a case could be valid.

Greg points out that by allowing cases to linger in these initial stages of review, the Whistleblower Office ensures that these claims will not be valid due to the expiration of the statute of limitations. 

The report cites various reasons that the Whistleblower Office put forward for why claims take significant time to review and examine whistleblower claims.  However, the report does not state how long the average claim spends at each step because, according to the report, “the Whistleblower Office and operating divisions do not have complete data on the length of time claims spend at each step of the review process.”  Another problem is the lack of accountability due to the way claims are tracked.  Scott was quoted in “GAO Faults IRS Whistleblower Program for Award Delays” by Jeremiah Coder of Tax Analysts as saying:

The current IRS system of tracking whistleblower cases does not put any responsibility on either the subject matter expert or chief counsel for delaying a case because their evaluation time gets lumped together, such that they can each blame the other for taking too long and not be held accountable to their supervisors.

Scott went on to point out that subject matter expert and chief counsel supervisors cannot see how long their staffs are taking to process a case.  The lack of information about how long the IRS is taking to get the information provided by whistleblowers into the hands of auditors creates additional uneasiness regarding the years that a whistleblower claim takes to process. 

The lack of communication between the IRS and whistleblowers makes the process unnecessarily frustrating for the whistleblower.  The report suggests increasing communications on the overall results of the whistleblower program could improve program transparency, while complying with the restrictions on disclosing taxpayer information.  The report also pointed out that the IRS is not fully utilizing the tools that Congress had given them when the enhanced whistleblower provisions were enacted.  Specifically, as Scott and Greg discussed in “GAO Faults IRS Whistleblower Program for Award Delays,” the IRS has yet to enter into any section 6103(n) agreements, which would allow the IRS to discuss the case with the whistleblower.  Section 6103(n) contracts would allow the IRS to know when a taxpayer had provided the IRS with false information.  Scott went on to say that “apparently there is an institutional resistance to asking for help.”  One of the primary issues Scott and Greg raised with the GAO was the IRS’s reluctance to enter into 6103(n) agreements despite the obvious benefits. 

The IRS said that it generally agreed with the GAO’s recommendations, such as improving E-TRAK to record the time-in-step for all claims and more accurately track the number of days in each step, track the reasons for claim rejections and suspensions, collect additional information through the Form 211, provide additional statistics in the annual report to Congress, and (most importantly) establish a process for the Whistleblower Office to follow up with subject matter experts that have had a claim for review for more than a set number of days.  If the IRS implements these recommendations, the IRS and the GAO may be able to make more specific recommendations, which in turn may help improve the efficiency of the Whistleblower Office. 

Lynam Knott