On March 2, Senators Charles Grassley (R-IA), Ron Wyden (D-OR), Roger Wicker (R-MS) and Ben Cardin (D-MD) introduced the bipartisan IRS Whistleblower Program Improvement Act of 2023. The Improvement Act provides critically needed reforms to the IRS Whistleblower Program which are necessary to ensure that employees who risk their careers to report large-scale tax frauds are fully protected.

“The IRS tax whistleblower program is in crisis,” said Stephen M. Kohn, leading whistleblower attorney at Kohn, Kohn & Colapinto and Chairman of the Board of Directors of the National Whistleblower Center. “The obstacles facing tax whistleblowers are unfair and intolerable. Congress required the IRS to pay whistleblowers a reward in large scale tax fraud cases. But the enforcement of this law has been crippled by loopholes. Wealthy Americans easily evade paying their fair share, while middle class taxpayers are overly burdened.”

“The current law denies whistleblowers due process in court, permits the IRS to reduce rewards below the statutory minimums intended by Congress, and places whistleblowers at risk for having their identities revealed. But worst of all the law permits the IRS to delay mandatory payments often necessary for whistleblowers to support their families for an indefinite period of time. Cases now average over ten years to complete, and the IRS has confirmed that whistleblowers have died waiting for their cases to be decided. The status quo is intolerable,” added Kohn, who has represented tax whistleblowers for over 15 years, including many who have reported multibillion dollar frauds committed by Swiss banks.

Among the reforms offered by the IRS Whistleblower Program Improvement Act are:

• Provides whistleblowers with due process rights if their cases are improperly dismissed by the IRS;

• Enhances the ability of the Courts to overturn illegal IRS denials of whistleblower claims by permitting whistleblowers to conduct discovery as to why the IRS denied their claims;

• Prohibits the IRS from using the “sequester” authorities to reduce whistleblower reward payments below the minimum levels requested by Congress. The IRS is the only federal agency that reduces whistleblower payments under the “sequester” authorities. These reductions hurt whistleblowers, who are often unemployed and economically harmed after they report illegal conduct;

• Enhances the right of whistleblowers to proceed confidentially or anonymously. The need for these protections are well recognized under other effective whistleblower law;

• Takes important steps to reduce the ten year delay in compensating whistleblowers. The current delays in paying whistleblowers is discouraging numerous whistleblowers from stepping forward.

The numerous problems facing the tax whistleblower law were outlined in a National Law Journal article entitled “IRS Annual Report Shows Whistleblower Program in Crisis.”

Geoff Schweller also contributed to this article.