In recent years, the IRS Whistleblower program has been plagued by understaffing, budget cuts, and very little accountability. Recent amendments have been made to the Internal Revenue Code of 1986 that modernizes and improves the IRS, especially the whistleblower program.
Prior to the passage of H.R. 3151 in June 2019, whistleblower complaints filed with the IRS often went into a black hole. Whistleblowers submitted the required information (Form 211) along with documents and records that allege tax evasion and within 60-90 days receive a letter from the IRS Whistleblower Office letting the whistleblower know that their correspondence was received and under consideration.
After that, years could go by before ever hearing from the Whistleblower Office. The Taxpayer First Act was signed into law on July 1, 2019. The new Act established an independent appeals process, new enforcement regulations, addressed cybersecurity and identity protection and other information technology issues. For whistleblowers, section 1405 on whistleblower reforms was good news. Section 1405 established:
- Modification to rules governing discloser of information to whistleblowers;
- The ability for the IRS to update whistleblowers on investigations; and
- To strengthen protection against retaliation for whistleblowers.
These changes may appear to be minor or insignificant, but the IRS has historically been tight-lipped about ongoing tax investigation. Prior to the new rules, the IRS staff were not allowed to communicate useful information to whistleblowers. In fairness to the IRS, this is to be expected. Taxpayer data should remain confidential. But the IRS has refused to work with whistleblowers and their attorneys after filing a complaint. Although we believe the three new changes don’t go far enough, they are helpful to the whistleblower and should expand the program over time.
The law now gives the IRS (through the Secretary of Treasury) the authority to make disclosures to whistleblowers but only to the extent that the disclosure is necessary to obtain information. This would apply to the correct tax liability or the amount to be collected through the enforcement of any provision.
As mentioned above, usually within 60-90 days, the IRS would respond to the whistleblower about their submission. The new provision now states that the Secretary has no more than 60 days to notify whistleblowers that their submission has been referred for audit or examination. Also, any payments made by a taxpayer must be disclosed to the whistleblower within 60 days. The notification of payment by a taxpayer is critical to ongoing cases. At the very least, it demonstrates to a whistleblower that progress has been made on the collection of taxes.
The final piece of the new Act relates to retaliation and allows a whistleblower to seek relief by filing a complaint with the Secretary of Labor within 180 days of a violation or filing a complaint in US District Court.
Morgan and Morgan takes pride in representing whistleblowers who chose to stand up against cheaters and fraudsters. We strongly encourage prospective whistleblowers to obtain counsel to assist them in filing whistleblower complaints. IRS rules and regulations can be difficult to understand and challenging to navigate. Our team of experienced lawyers and investigators will be with you during the entire time from the initial filing to the ultimate resolution. Our work is always done on a contingent basis. If you know of a company that has committed tax evasion of more than $2 million, reach out to us. All calls and information shared is treated confidentially.