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Regulation and Compliance > Federal Regulation > IRS

Senate Bill Strengthens IRS Whistleblower Protections

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What You Need to Know

  • Bill would strengthen protections for whistleblowers when they come forward, Wyden said.
  • It will help Treasury properly implement the IRS whistleblower law, says attorney Kohn.
  • The IRS whistleblower program would have to tell Congress each year about the top 10 tax avoidance schemes.

Senate Finance Committee Chairman Ron Wyden, D-Ore., and  Sen. Chuck Grassley, R-Iowa, introduced legislation Tuesday to help the Internal Revenue Service’s Whistleblower Reward Program catch tax dodgers.

The IRS Whistleblower Program Improvement Act includes seven measures to help bolster the program, which the lawmakers say has enabled the agency to collect more than $6 billion from wealthy individuals and businesses caught dodging taxes.

“IRS whistleblowers play a critical role in protecting taxpayer dollars and finding tax cheats stealing from the American people. It would be far more difficult to uncover these illegal schemes without their courage, and our bill would strengthen protections for these brave Americans when they come forward,” Wyden said Tuesday in a statement.

Added Grassley: “We ought to do whatever we can to ensure its continued success, so tax dodgers and fraudsters pay what they owe. Toward this end, it’s vital that whistleblowers who come forward are protected and treated fairly.”

The bill, according to Grassley and Wyden, would help “ensure fairness and protect the whistleblowers who come forward.”

It provides for De Novo review in appeals heard by the U.S. Tax Court — allowing for new evidence to be admitted to the record, and establishes a presumption of anonymity for whistleblowers before the court, according to a summary of the bill.

The legislation also exempts whistleblower awards from budget sequestration, provides that interest be paid to awardees if the award has not been paid within one year and brings the tax treatment of attorney’s fees into line with other whistleblower programs by not subjecting whistleblowers to double taxation on attorney’s fees.

The bill also allows the IRS to retain some proceeds for the administration of the program. As the bill summary explains, “similar to the False Claims Act, the Commodity Futures Trading Commission whistleblower award program, and the IRS debt collection program, the proposal will allow the IRS to retain 3% of proceeds collected (up to $10 million indexed for inflation) under the whistleblower program to be retained and used for program costs associated with administering the program.”

The IRS whistleblower program would also be required to list in its annual report to Congress the top 10 areas where whistleblowers have identified tax avoidance schemes.

Whistleblower attorney Stephen Kohn of Kohn, Kohn & Colapinto, who also serves as the Chairman of the Board of Directors of the National Whistleblower Center, said Wednesday in a statement that “the tax whistleblower law has recovered billions of dollars to the U.S. treasury. Tens of thousands of illegal offshore accounts have been shut down by whistleblower disclosures. It’s time for the Department of Treasury to properly implement the IRS whistleblower law. This bill will achieve that goal.”


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