According to the IRS’s Fiscal Year 2018 annual report, it paid a record-high number of whistleblower awards during the year.
Payments for the year totaled $312 million after information provided by whistleblowers resulted in the recovery of $1.44 billion. Whistleblowers are usually entitled to a portion of the money recovered after an investigation is conducted and the target is found to be guilty of fraudulent, unethical, or illegal actions.
The bounty awards paid in 2018 reflected a ten-fold increase in the amount paid the previous year.
2018’s amount reflected 217 total awards, 31 of which were mandatory under IRS code. The remainder were discretionary, which meant the government reviewed the case and determined that it was appropriate to pay the whistleblower. The average award recipient received about 21 percent of the total amount recovered in their case. This, too, was up from the previous year when average awards were about 17 percent of the recovery amount.
Changes in the Law Led to Higher Awards
According to Lee Martin, Director of the IRS’s Whistleblower Office, the increase in recoveries and awards was because of enhancements in the program. This included giving information to whistleblower earlier in the process through something known as a Preliminary Reward Recommendation Letter.
Martin also pointed out that IRS Code section 7623(c), which was part of the Bipartisan Budget Act of 2018, made a significant difference in the size of awards given to whistleblowers during the year. According to the addition, “proceeds” were defined to include penalties, interest, additions to tax, and more, entitling whistleblowers to more money even if the percentage ratio remained the same. In the past, the recovery percentage did not include criminal fines or civil forfeiture.
IRS Whistleblowers Receive Less Protection for Reporting Wrongdoing
The IRS program is separate from the whistleblower programs backed by the SEC and the CFTC. Those contain anti-retaliation provisions, something not offered to individuals under the IRS program. The IRS does protect the identity of the whistleblowers whenever possible and even tries to avoid stating that a recovery was made as the result of a whistleblower report. Martin has requested that Congress provide the same protections to IRS whistleblowers as it does to other government agencies because he believes that with protection from economic and physical harm, even more cases of fraud could be uncovered.
Though there is no direct protection for IRS whistleblowers, the Sarbanes-Oxley Act does provide some protection in certain situations as long as the accusations are reasonable.
Furthermore, retaliating against an IRS whistleblower could result in criminal charges for the target of the investigation. If an entity is found to have interfered with an investigation, fired the whistleblower, or taken any sort of negative or damaging action against the whistleblower as the result of the report can face steep fines and imprisonment of up to 10 years.
The IRS encourages entities to handle whistleblower reports as it would a report to the SEC or CFTC even if the individual or individuals filing the report aren’t entitled to the same protections.