John Hinman, Director of the IRS Whistleblower Office, discusses how whistleblower information contributes to identifying noncompliance and reducing the tax gap. Get to know the IRS, its people and the issues that affect taxpayers. By John Hinman, Director, IRS Whistleblower Office CL-22-10, July 21, 2022 After 39 years at the IRS, I’m excited to be taking over new duties as the director of the IRS Whistleblower office, which plays an important role in our nation’s tax administration system. Our nation’s tax system is built on the principle of voluntary compliance. When this principle is observed, taxpayers file tax returns and pay their taxes timely and accurately without the need for compliance activity by the IRS. Voluntary compliance is aided by the knowledge that non-compliance with tax laws will be addressed through examinations, collection activities, criminal investigations and other tax enforcement work. The IRS uses increasingly sophisticated data analytics and other methods to detect non-compliance with tax laws, but we can’t find it all by ourselves. We need help from whistleblowers – people with firsthand knowledge of non-compliance who are willing to share what they know with us so we can investigate it when warranted. The IRS Whistleblower Office was established by the Tax Relief and Health Care Act of 2006. Each year, the IRS receives thousands of award claims from individuals who identify taxpayers who may not be abiding by our nation’s tax laws. My office ensures that award claims are reviewed by the appropriate IRS business unit, determines whether an award should be paid and the percentage of any award, and ensures that approved awards are paid. Since the inception of the Whistleblower Office in 2007, the IRS has paid more than $1.05 billion in over 2,500 awards to whistleblowers. The information provided by these individuals led to the successful collection of over $6.39 billion from non-compliant taxpayers. The awards paid to whistleblowers generally range between 15 to 30 percent of the proceeds collected and attributable to their information. Whistleblower Office Partnerships and Success Stories A key part of my job is to ensure the Whistleblower Office works closely with the IRS business divisions that conduct examinations and investigations based on award claims. One example of the benefits of our partnership with other IRS divisions is my office’s work with the Large Business and International (LB&I) division. They’ve shared with me that whistleblowers have provided invaluable insights into violations perpetuated by large corporations, wealthy individuals, and their planners including underreporting taxable income, undisclosed offshore assets, and much more. LB&I even noticed that after they launched compliance campaigns on various issues, there was an increase in whistleblower claims directly related to those campaigns. My colleague and Chief of IRS Criminal Investigation (CI) division, Jim Lee, noted that many of CI’s successful investigations were made possible with the assistance of the IRS Whistleblower Office and the valuable contributions of whistleblowers. Since the establishment of the Whistleblower Office, information from whistleblowers has resulted in over 900 criminal tax cases ranging from a licensed medical physician who underreported income to a large multi-national financial institution and its U.S. taxpayer clients who hid assets overseas. CI’s valued partnership with the IRS Whistleblower Office will continue to enhance tax enforcement and promote voluntary compliance. Filing a Claim for an Award Individuals who have information regarding non-compliance with any laws the IRS is authorized to administer, enforce, or investigate must file a Form 211, Application for Award for Original InformationPDF to be considered for an award. Claims meeting these criteria are most likely to be accepted for additional consideration: Specific: The information provided allows the IRS to identify the taxpayer and specifies what the alleged tax violation is. Documentation, if available, or a description of relevant documents and their location is provided. The information includes an estimate of the amount of potential tax owed, income omitted, deductions overstated, assets hidden, etc. Timely: The information is submitted in time for the IRS to act on it. Credible: The information is coming from a person who has firsthand knowledge or from a reliable source that is documented. An explanation of how the whistleblower became aware of the information is provided. The claim is not speculative in nature. What Happens to a Whistleblower Claim? If a claim is specific, timely and credible, it may be referred for additional consideration to one of IRS’s operating divisions, including Criminal Investigation, Small Business/Self-Employed, Large Business and International, and Tax Exempt & Government Entities. These divisions determine whether claims include original information, whether claims warrant action, and whether the IRS has the resource capacity to conduct an investigation, examination or other compliance activity. A subject matter expert may contact the whistleblower to ensure we fully understand the information submitted. Whistleblower awards can only be paid after a taxpayer has exhausted all appeal rights, paid the taxes and other amounts, and the taxpayer can no longer file a claim for refund or otherwise seek to recover proceeds from the government. That process may take up to 10 years or more to complete. The IRS notifies whistleblowers when a case for which they provided information has been referred for audit or examination. In addition, the IRS notifies them when the taxpayer they identified makes a payment which is attributable to information they supplied. More information on the whistleblower process can be found in Publication 5251PDF, The Whistleblower Claim Process and Timeline. Protecting Whistleblower and Taxpayer Information The IRS takes the protection of whistleblower identity very seriously. We protect against the disclosure of a whistleblower’s identity, and even the fact that they have provided information, to the maximum extent that the law allows. In addition, whistleblowers are protected from retaliation by their employers under a law passed in 2019. We also protect the confidentiality of taxpayer information and make disclosures only as allowed under the law. Looking Ahead I’m proud of the work the Whistleblower Office has done and will continue to do, and it’s clear to see the program is working. Whistleblower information that the IRS can act on is an important component of effective tax administration and contributes to identifying noncompliance and reducing the tax gap. Going forward, the Whistleblower Office team will continue to make improvements to this important program. We will be looking to find ways to raise awareness about the program for potential whistleblowers as well as continue to look for ways to gain internal efficiencies to move cases forward as quickly as possible. We appreciate the valuable contributions that thousands of whistleblowers have made to help bolster the fair and effective enforcement of our nation’s tax laws and the success of our voluntary tax system. The continued success of the IRS Whistleblower Program is dependent on people who become aware of tax fraud and tax non-compliance and report that information to us, and on the dedicated IRS workforce that supports this important program. About the Author John Hinman is the Director of the IRS Whistleblower Office. The Whistleblower Office was established by the Tax Relief and Health Care Act of 2006 and works to provide fair treatment for whistleblowers and taxpayers, and to support IRS efforts to apply tax laws with integrity and fairness. The program has offered monetary awards to whistleblowers who voluntarily expose tax law violations. Overall, the IRS has awarded whistleblowers over $1 billion based on the collection of over $6 billion in back taxes, interest, penalties, and criminal fines and sanctions. 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