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November 21, 2014


The IRS whistleblower program, part 1: the False Claims Act

The IRS has a program to reward those who blow the whistle on unpaid taxes by others. It offers financial incentives to disclose tax evasion, especially within large organizations.

For years, critics have contended that the program is not as effective as it should be. One such critic, Sen. Charles Grassley of Iowa, has been particularly persistent and positively persnickety in his pronouncements about the program.

In part one of this two-part post, we will outline some of the basic features of the program. In part two, we will take note of the criticism the program has received and update you on proposals for change.

The roots of the current whistleblower program date to the mid-1980s. In 1986, Congress reformed the federal False Claims Act, seeking to encourage more whistleblowers to come forward to provide information about fraud and other wrongdoing that costs Uncle Sam money.

The Act sought to encourage this by providing financial awards to those who come forward. The size of the awards is based on the amount of money the whistleblowers help federal agents recover.

The U.S. Treasury has gained billions of dollars from such actions to uncover fraud. By one estimate, the overall amount is nearly $35 billion since the 1986 overhaul of the False Claims Act.

The IRS’s whistleblower program was most recently tweaked in 2006. Even its critics concede that it has brought in a lot of money since then. In round numbers, the figure is about $2 billion.

Congressional critics contend, however, that the program has many excessive delays and could be greatly improved. We will explore those contentions further in part two of this post.

Source: Politico, “Will the IRS Even Listen?” Sen. Ron Wyden and Sen. Chuck Grassley, Oct. 28, 2014