On June 10, the Internal Revenue Service (IRS) Whistleblower Office released its Fiscal Year 2021 Annual Report. In Fiscal Year 2021 (FY 2021), which ran from October 1, 2020 – September 31, 2021, the IRS Whistleblower Program collected $245 million thanks to whistleblower tips and paid out $36 million in whistleblower awards. These statistics, which are drastically lower than those of recent years, as well as the long delays detailed in the report, highlight the need for reforms to the whistleblower program.
The amount awarded to whistleblowers by the IRS in FY 2021 was the lowest since FY 2017 and was only about half of the average yearly total for the program’s history. The $36 million total is also extremely lower than the amount awarded in FY 2018. That year, the IRS Whistleblower Program granted a record $312 million in whistleblower awards.
The total amount of money collected from fraudsters by the program correspondingly slumped in FY 2021. The $245 million is significantly lower than the $1.44 billion collected just three years ago.
Furthermore, the report reveals that the IRS Whistleblower Program currently takes over 11 years on average to process award claims. In the past, numerous IRS whistleblowers have died before being granted an award.
“The IRS whistleblower report should be a massive wakeup call to Congress that it needs to take action now and pass the bipartisan and bicameral reform legislation – the IRS Whistleblower Program Improvement Act,” said Kohn, Kohn & Colapinto founding partner Stephen M. Kohn. “Passage of this legislation will send a strong signal of support for the program to the IRS and to whistleblowers. It isn’t a coincidence that the number of awards has gone down and down since the Tax Court changed the standard of review for tax whistleblower decisions to a rubber stamp. Whistleblowers need to have confidence – and IRS managers need to know — that whistleblowers will get a full independent review of any denial of a whistleblower award.”
The Whistleblower Program Improvement Act was introduced by Senators Chuck Grassley (R-IA) and Ron Wyden (D-OR) on June 15, 2021. The bill makes several reforms to the IRS Whistleblower Program in order to improve the program’s operations and better protect whistleblowers who expose tax fraud. These include providing for de novo review of whistleblower decisions in Tax Court, removing sequestration of whistleblower awards, and imposing interest on whistleblower awards that are subject to significant delay.