IRS Under Pressure to Improve Whistleblower Program

The IRS promises to improve its whistleblower program after outcry ensues over its handling of AlliantGroup’s alleged misdeeds, as reported by two former employees. The firm, which is a politically connected advisory entity that helps clients apply for lucrative tax benefits, was allegedly also helping them sidestep taxes. The former employees submitted a 32-page report with internal emails and documents to the IRS, alleging that the illicit activity resulted in the clients of the firm possibly owing the IRS more than $712 million dollars. Through the whistleblower program, the informants stood to make more than $210 million, as the law offers whistleblowers as much as 30% of what the government recovers from their tips.

The auditors at the IRS never looked at the report, though. The IRS rejected the claim twenty-one months later, despite the absence of a review. The IRS’ decision also disregarded the request by some of its own agents to convene a grand jury, according to internal documents.

The Whistleblower Program of the IRS was created by Congress in 2006 to boost tax revenue through the information brought to the IRS by tipsters; instead, it has become a place where “allegations of tax avoidance go to die,” according to an article in Bloomberg.

After program came under fire this week, the IRS has decided to review the reports in an effort to change its public perception and to tighten up the program to better utilize the information that is coming in from valuable sources. Out of 1,300 claims, just three awards to whistleblowers have been made.

The IRS does not have a problem attracting these whistleblowers, says Senator Charles Grassley, the Iowa Republican who sponsored the law. The issue lies in the processing and compensating of the individuals who are come forward with this information. If the issue continues, sponsors of the law worry that whistleblowers will no longer feel the need to come forward, and millions of more dollars will be lost due to tax evasion.


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