IRS Changes Suggest an Increase in “Whistleblower” Cases is Soon to Come

The IRS is nothing if not relentless—particularly when it comes to squeezing every possible dollar of revenue from taxpayers. In addition to their stringent reporting requirements, audit process, and often brutal collection tactics, the IRS has another “secret weapon” when it comes to generating revenue: whistleblowers. The IRS has long had a policy of rewarding individuals who come forward with information that leads to additional tax liability for an individual or a business. However, recent developments at the agency suggest that whistle blowing will become even more prevalent in the future. Forbes.com reports:

The news that Steven Miller, deputy commissioner for services and enforcement at the Internal Revenue Service, will become acting IRS commissioner next month is likely to be a welcome development for tax whistleblowers.

Finally there will be a person in charge of the IRS who appears to be invested in its whistleblower program and knowledgeable about its potential.

Miller will replace IRS Commissioner Douglas Shulman, whose term ends Nov. 9.  Shulman took over as commissioner in 2008. Since that time, the IRS whistleblower program has been on a downward spiral.

During Shulman’s tenure, whistleblowers have received the cold shoulder from the IRS, causing whistleblowers to doubt the agency’s commitment to the program.

Shulman’s legacy with whistleblowers is in the numbers.  Since 2009, the number of claims has steadily sunk: The number of whistleblowers stepping forward has declined by a third, to the lowest point in four years.

Miller’s track record shows that his appointment as acting commissioner could invigorate the IRS whistleblower program.  It was Miller who issued an internal memo in June that set timelines for IRS sections to review and act on whistleblower information.

“Timely and comprehensive evaluation of information provided by whistleblowers is essential to the success of this program,” Miller noted. “Please give this subject your personal attention so that the Service can take full advantage of whistleblower information in our compliance programs.”

The IRS has taken some encouraging steps recently, making awards to a number of whistleblowers, including an award of $104 million to the UBS whistleblower, Bradley Birkenfeld. We can only hope that Miller will continue to see the value of whistleblowers to tax enforcement and will give the whistleblower program the “personal attention” he has requested from others.

Obviously, bending the law in order to minimize your tax liability is a bad idea. The bottom line is that sooner or later, the IRS is likely to track you down—and when they do, you’ll be far worse off than if you had simply followed the law in the first place. Nonetheless, the prospect of an increase in whistle-blowing is disturbing for many taxpayers and businesses. The last thing any of us need is further aggression on the part of the IRS—not to mention the time that is demanded in order to deal with the agency. The lesson? Be more careful than ever to comply with tax laws so that you don’t find yourself on the wrong end of an investigation.

For some of you, it may be too late—you may already be staring down the barrel of an IRS dispute. If that’s the case, we can help! Please get in touch with us today to learn more.