Gao Casts Dim View on IRS ‘Whistleblower’ Program

Recall that the “Tax Relief and Health Care Act of 2006” allowed for an expansion of the IRS’ “whistleblower” program, under which rewards can be available to snitches who report knowledge of other folks’ tax underpayments.  The rewards can be substantial (up to 30% of whatever the Revenooers collect from the malingerers).

But the IRS “whistleblower office” seems to leave a lot to be desired, according to the Government Accountability Office’s (GAO) recent audit of the joint.  First of all, GAO notes that whistleblower claims can take years to wind their way through IRS review and award determination process.  Right now, something like 66% of the claims submitted during the first two years of the program are still in process.

IRS blames the tardiness on everybody else, of course, including the targets themselves, who possess rights of appeal which, if exercised to the hilt, can add years to the process.  But this is the one which is truly aggravating, though reflective of just about everything else IRS does:  the whistleblower office apparently does not have any time targets within which to complete its work, nor does the whistleblower office employ any systematic process which it follows.  In short, it sounds like the whistleblower office just takes its own sweet time in getting around to things.  Not even Congress seems to have much clout with these blokes – they are supposed to report annually to the folks on the Hill, however the most recently released report, for fiscal year 2010, did not contain information regarding processing times, or any specific data regarding why IRS has rejected whistleblower claims.

Funny – most of us aren’t afforded the luxury of such cavalier deportment by our superiors.

Nor are most of us honest folk coddled by IRS and the various states in the manner so many scofflaws are in the form of seemingly ever-expanding “amnesty” programs which just keep coming down the pike.

Take California, f’rinstance, which is providing yet another amnesty program (its latest “Voluntary Compliance Initiative”) to folks who have participated in what have been deemed to be abusive tax avoidance transactions, or ATATs.  FTB has already identified and contacted some 47,000 taxpayer suspects, inviting them to participate in the amnesty program, in exchange for waiver of a bunch of the penalties which would otherwise apply if the taxpayers simply got caught by way of the normal audit process.

In case you’re interested, you can apply for this amnesty by this coming Halloween, relative to the 2010 and prior tax years.  Submit your completed “Participation Agreement” form with your amended tax return, and pay all taxes due with interest.

And do have a nice day.

CONSULT YOUR TAX ADVISOR – This article contains general information about various tax matters.  You should consult your CPA regarding the implications to your own particular situation.

Jeff Quinn, the author of this article, is a shareholder in Ashley Quinn, CPAs and Consultants, Ltd., with offices in Incline Village and Reno.  He can be reached at 831-7288, welcomes comments at jquinn@ashleyquinncpas.com, and invites readers to consider his other commentaries at http://blog.nolo.com/taxes/.

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