January 2017

Tax Controversy Alert: IRS Releases Annual Report on Whistleblower Program


The IRS Whistleblower Office recently issued its report to Congress on the IRS Whistleblower Program’s results for the 2016 fiscal year.

In its report, the IRS noted that “FY 2016 was, by several measures, a very productive year for the Whistleblower Program.” Specifically, the IRS report notes that the Whistleblower Office made 418 awards to whistleblowers totaling more than $61 million. This represented a 322% increase in the number of awards paid as compared to FY 2015 when only 99 awards were paid. The report further notes that in the 10 years since the Whistleblower Program began in 2007, the IRS has awarded more than $465 million to whistleblowers. The IRS report states that FY 2016 was a “transformative year” for the Whistleblower Program in that it deployed additional resources to the Program to address or eliminate backlogs and to ensure going forward that the claim review process is “streamlined, efficient and effective, enabling whistleblower claims to be timely and appropriately evaluated.”

The IRS Whistleblower Program exists under the authority of Internal Revenue Code Section 7623. Under this statute, the IRS is generally required to pay awards to individuals who provide information to the IRS which substantially contributes to the collection of tax, penalties, interest and other amounts when the amounts at issue are greater than $2,000,000. Awards are based upon the extent to which the whistleblower substantially contributes to the IRS’s recovery of funds and can range from 15 to 30% of the collected proceeds. The IRS may make lower awards of up to 10% of collected proceeds in cases involving less substantial contribution. The IRS also has an award program for individuals who do not meet the dollar thresholds set forth in Section 7623.

IRS whistleblower claims are made by filing IRS Form 211 with the IRS Whistleblower Office. Many claims are rejected because they do not present a tax issue or do not present clear, specific allegations. According to the IRS, in FY 2016, 12,395 claims were rejected because they “were Not Specific, Credible, or [were] Speculative in Nature.” Well-documented and thorough claims clearly presenting a tax issue are more likely to result in awards. A whistleblower may seek review of an IRS determination regarding an award in the U.S. Tax Court in the event of a dispute.

Please contact Steve Katz or Jay Weill at Sideman & Bancroft LLP if you need representation by one of our tax controversy attorneys in pursuing an IRS whistleblower award or if you have questions regarding the IRS Whistleblower Program.