U.S. senator takes IRS to task over whistleblowers

Tue Jan 29, 2013 12:24pm EST

Jan 29 (Reuters) - A top Republican on the Senate Finance Committee said that rules proposed to improve the Internal Revenue Service's whistleblower program may not be effective because they limit awards and discourage informants from coming forward.

The proposed rules, drafted by the IRS, are an attempt to clarify for whistleblowers and their lawyers as well as IRS staff and the public how rewards will be paid to informants and other general rules such as how to submit information.

The IRS whistleblower program gathers information from people who want to alert the agency to possible wrongdoing.

But the proposed changes don't go far enough in improving communications with whistleblowers, thereby "crippling the most successful program the administration has to go after the big time tax cheats," Senator Charles Grassley wrote in a letter sent late Monday to acting Secretary of the Treasury Neal Wolin and Steven Miller, acting IRS commissioner.

Grassley's concerns echo those voiced by lawyers for whistleblowers that the proposed rules, issued in December, could make collecting awards more difficult.

The Iowa Republican co-authored the 2006 law that overhauled the whistleblower program by establishing an office within the IRS to oversee financial awards paid to informants.

Whistleblowers, generally current or former employees of a firm, bring evidence of potential wrongdoing to the attention of the IRS. In exchange they receive up to 30 percent of whatever additional tax collections are made based on their information.

In the 2011 fiscal year, the program collected only $48 million in tax revenue, down from $464 million in fiscal 2010, as the number of cases declined. As a result, payments to whistleblowers dropped to $8 million in fiscal 2011 from $18 million in fiscal 2010.

Concerns that the whistleblower division has insufficient staff and resources and that its reports to Congress are delayed, were also outlined in the letter.

The IRS did not immediately respond to request for comment.