U.S. IRS whistleblower payouts down, critics say program too slow

WASHINGTON, April 7 (Reuters) - The U.S. Internal Revenue Service reported it made progress last year in rewarding tax whistleblowers with a few big cash payouts, but critics said the tax agency is still struggling to act quickly on informants’ tips.

For the fiscal year ended Sept. 30, the IRS said late last week that it paid whistleblowers $53.1 million, down from $125.4 million in 2012; $8 million in 2011; and $18.7 million in 2010.

The whistleblower program is aimed at encouraging people who know about tax evasion by companies or individuals to step forward and alert the IRS. Critics have long complained that the program moves too slowly and is inadequately funded, making would-be whistleblowers reluctant to file claims.

Republican Senator Charles Grassley of Iowa, who has hammered the IRS for not using the whistleblower program more effectively, said last year’s larger payout total was good news.

But, he said in a statement on Friday, “The bad news is the progress in making payouts is slow. My worry is that the slow progress will cause the tips to dry up.”

The number of new whistleblower submissions, however, inched up to 355 in 2013 from 332 in 2012, the IRS report said.

Collections of taxes by the IRS from taxpayers exposed by whistleblowers fell last year to $367 million from $592.5 million in 2012.

The 2012 awards payout total was unusually high because of Bradley Birkenfeld, a former UBS AG employee, who got $104 million from the IRS for exposing Americans who hid millions of dollars in Swiss bank accounts.

The IRS said whistleblowers should not expect a sudden surge in big rewards. “The number of payments ... is not projected to grow dramatically in fiscal 2014,” the report said, adding it takes five to seven years to collect taxes from valuable tips. (Reporting by Patrick Temple-West; Editing by Kevin Drawbaugh and Jonathan Oatis)