Guest Post: A New IRS Budget and (Hopefully) Bright Future for Tax Enforcement
The IRS has released its tentative plan for spending the approximately $80 billion Congress recently allocated the agency, and there are encouraging signs for tax whistleblowers.
In its budget plan, the agency showcased some of its goals for improving its technological capabilities, along with customer service and enforcement efforts. According to the Strategic Plan summary, the IRS’s “shrinking workforce has made it more difficult for taxpayers to get the service they deserve,” and “increasingly complex tax administration and limited” personnel has led to diminished enforcement capabilities.
However, there is hope that, given other areas of improvement, the IRS–and tax whistleblowers in turn–will see a dramatically improved enforcement arm. Specifically, the IRS has already seen improvements in key areas such as percentage of customer calls answered and wait time averages.
Although the digital modernization and enforcement objectives will take much longer for improvement to take hold, it is clear that IRS leadership is in support of enforcement efforts, and tax whistleblowers specifically.
Commissioner Danny Werfel stated last month that targeting wealthy tax cheats, and the IRS Whistleblower Office, are top priority areas.
“It is critical that the IRS’s Whistleblower Program be treated with the highest priority,” he said.
The Service brings in approximately $5 trillion per year, which equates to roughly 96 percent of our country’s gross revenue. Still, the tax gap has been estimated at approximately $7 trillion over the next decade.
Werfel has specifically stated that the agency’s intake system for tax noncompliance tips will be key in revamping the agency’s enforcement efforts.
The IRS Whistleblower Program offers claimants awards for bringing forward information regarding tax noncompliance that ultimately is used by the government to collect proceeds.
Unfortunately, the program has seen brighter days.
Since its inception, the IRS Whistleblower Office, which recovered $1.4 billion in taxes owed in 2018, has seen plummeting award numbers and proceeds collected, as well as incredible delays in timing for award determinations.
Now, it isn’t just Werfel who has taken notice. Members of Congress have introduced a bipartisan, bicameral bill that looks to strengthen the IRS Whistleblower Program.
The IRS Whistleblower Program Improvement Act proposes:
- Improving whistleblower appeals at the U.S. Tax Court by enabling a de novo review standard, which would allow for new evidence to be admitted for the record;
- Creating a presumption of anonymity for whistleblowers who choose to appeal their determination to the U.S. Tax Court;
- Exempting whistleblower awards from budget sequestration;
- Providing that interest on awards be paid to whistleblowers if the awardee has not been paid within one year of the agency collecting proceeds;
- Making the tax treatment of whistleblower attorney fees consistent with other programs such as the SEC Whistleblower Program; and
- Improving the IRS Whistleblower Office Annual Report to Congress
The legislation would greatly improve a tax whistleblower’s ability to appeal IRS determinations they do not agree with, a core aspect of due process that has so far been absent from the program. The bill also aims to bring tax whistleblowers greater protections in terms of their identity and financial interests.
As the IRS continues to work toward implementing its newfound budget increase, tax whistleblowers and practitioners alike should watch closely for improvements in enforcement efforts that could lead to brighter days for tax whistleblowers.
Even though the IRS Whistleblower Program is just a portion of the agency’s enforcement arm, it’s a vitally important one that has the potential to drastically shrink the tax gap. This will only help the agency’s continued efforts to convince Congress that: more agency money, more government return.
National Whistleblower Center hosted a fireside chat with Eric Hylton former Internal Revenue Service SBSE Commissioner and Siri Nelson Executive Director at NWC on April 18, 2023. To learn more about the IRS whistleblower program and these much needed improvements, watch today.
This guest post was written for NWC by Matthew Beddingfield, a Senior Associate at Zerbe, Miller, Fingeret, Frank & Jadav, LLP. To learn more about how to write for NWC please contact us at email@example.com. National Whistleblower Center is a 501(c)3 non-profit organization — support our work with a tax-exempt donation today.