The U.S. Congress has passed the Taxpayer First Act of 2019 which, among other things, provides protections to whistleblowers against retaliation of physical or economic harm. President Trump signed the bipartisan legislation into law on July 5, 2019.
Congress has recently passed the Taxpayer First Act of 2019 (TFA) which provides new protection for whistleblowers reporting individuals or companies who have failed to pay taxes. The bill was signed into law by President Trump.
Since 2006, with enactment of the IRS Whistleblower Reward program, whistleblower disclosures have allowed the IRS to collect over $5 billion in unpaid taxes. The reward program allowed the Whistleblower Office to award $811 million to whistleblowers but the program failed to offer protections against retaliation. Many whistleblowers have been reluctant to come forward as there were no laws protecting them against intimidation or retaliation due to their reporting.
Whistleblower protections against retaliation
Congress’ action will provide that protection specifically for IRS whistleblowers reporting on underpaid or unpaid federal taxes. The Taxpayer First Act of 2019 (TFA) was modeled on other whistleblower protections that were provided to whistleblowers in other laws such as the Sarbanes-Oxley Act and the False Claims Act. Both Acts protect whistleblowers in and outside of government agencies from retaliation through economic or physical means.
Whistleblowers are afforded the retaliation protection even if the disclosures do not result in a decision of tax fraud. If reporting potential fraud or under payment was done in good faith with a reasonable belief that the law had been broken, the whistleblower is protected against retaliation. In addition, those who discover tax fraud in the course of performing routine job duties, who are duty-bound to report irregularities are also provided protections.
Protections against retaliation include firing, disclosure of identity, demoting, suspending, harassing or other activities which would reasonably deter a person from making a disclosure. It lowers the proof of burden that must be given to show that retaliation occurred and considers issues like time, irregular explanations, inconsistent application of policies, changes in documentation and other issues which have in the past, allowed employers to deny responsibility.
If retaliation is found to have occurred, the whistleblower may be eligible for reinstatement, double back-pay, interest on unpaid amounts, attorney fees and costs, and “special damages” which can include emotional distress and reputational harm.
Other protections afforded by TFA
In addition to providing protections against retaliation and protecting taxpayer privacy, the bill has also authorized the IRS to communicate with whistleblowers during claim processing. Once the TFA is passed, whistleblowers will be automatically notified within 60 days after referrals of audit or tax payments have been made due to the whistleblower’s action. This will enable the whistleblower to track a reported case and receive information about the status of any award they may be eligible for.
The TFA also modifies rules that private debt collectors must follow to ensure that low-income taxpayers are not targeted through improper practices and enables the IRS to provide matching funds to volunteer income tax preparation programs.
The Taxpayer First Act of 2019 was passed by the House on June 10, 2019 and the Senate on June 13, 2019. President Trump sign it into law on July 5, 2019.