IRS whistleblowers collected $53 million in 2013, by snitching on their tax-cheating friends, neighbors and co-workers — or anyone who might owe at least $2 million in taxes to the government. But critics this week slammed the IRS whistleblower program as a failure, because it is, they say, too slow to pay off tipsters who turn in in tax frauds.
Sometimes, they say, the IRS simply does not pay out the promised rewards at all.
The IRS released its annual whistleblower report on Friday, telling Congress that the $53 million payout was spread among 122 tipsters, for an average of about $435,000 per reward. But those 122 were culled from 9,268 reports that came in from whistleblowers.
All told, the IRS scooped up $367 million in taxes it would not have otherwise collected, thanks to the IRS whistleblowers. But even though the number of total tips was somewhat higher than in 2012, the number of tips that led to collections was lower, as was the total sum collected.
In 2012, the IRS collected $592 million thanks to whistleblower tips.
Even Senator Chuck Grassley, who helped write the seven-year-old IRS whistleblower law, complained that the IRS was too slow to pay out rewards to its informants, creating a disincentive for tipsters to come forward with information about tax cheats.
“There’s a lot of pending cases that they are not zeroing in on,” said Grassley, an Iowa Republican. “It’s taking them forever to make decisions, and whistleblowers in the meantime don’t get adequate updates or any information whatsoever.”
The tipsters are often tax attorneys who often hear about taxpayers looking for ways to dodge large amounts owed to the IRS. One such attorney, Ralph Minto of Pittsburgh, told a local paper there that he has alerted the IRS to information in 10 different cases. But he has never seen a dime in rewards from the IRS.
“They took the information, and that’s the last you hear of it,” he said.
During a seminar in January, the IRS Whisteblower Office director Stephen Whitlock offered an explanation as to why informants often wait years to receive their promised rewards.
“The taxpayer has rights throughout the process,” Whitlock said. “We have to conduct an audit. We have to assess tax. The taxpayer can go through an administrative appeal. They can take a judicial appeal.”
If the IRS collects at least $2 million from a tip, whistleblowers under the law should receive between 15 and 30 percent of what the IRS brings in.