In our review of the 17 paid 7623(b) claims as of June 30, 2015, we found  that claims took 4 years to 7½ years from the submission of the Form 211  to the award payment. The WO is not an exception. However, those plans were contingent on IRS’s proposed fiscal year  2015 budget, which IRS did not receive. Because the WO does  not track the date collected proceeds are finalized against the date of  mailing the award recommendation package, it cannot assess its  performance against the timeliness target. IRS Has Collected More Than $2 Billion from Whistleblower Claims since 2007, but Some Award Payments Were Miscalculated

		IRS Has Paid 17 High- Dollar Claims, Half of Which Resulted in Collected Proceeds Over $10 Million Each

Since fiscal year 2007 (when the 7623(b) program was established), IRS  has collected more than $2 billion from both the 7623(a) and 7623(b)  programs. WO Made Errors in Determining Collected Proceeds and Calculating Awards and Has Not Documented Corrective Actions

During the course of our case file review of the seventeen 7623(b)  awards, we found that the WO made errors in calculating whistleblower  awards and communicated incorrect award information to whistleblowers  in five cases. In total, these award errors amounted to approximately  $100,000. Whistleblower Office Communications Are Limited by Insufficient Data and Prohibitions on Disclosing Taxpayer Information

		Untimely and Inconsistent Data in the Whistleblower Office Annual Reports to Congress Hinder Program Oversight

A key communication tool that the Secretary of the Treasury and IRS use  to inform Congress and the public about the WO and 7623(a) and  7623(b) programs is the WO’s annual report to Congress. This report is  required by the Tax Relief and Health Care Act of 2006, the same  legislation that established the WO and the 7623(b) program, and  requires the Secretary of the Treasury to conduct an annual study of  section 7623 programs, and to include in the annual report legislative or  administrative recommendations for the program. Furthermore, last minute changes to the report have introduced  discrepancies. Whistleblower program stakeholders have voiced concern about this  limited communication. Our review of the published fact sheets found they did not include some  key information relevant to whistleblowers and did not provide much new  information beyond what is already available on www.irs.gov. The fact sheets state that claims  can take 5 to 7 years to complete the review process without providing  any additional information about why it may take longer. While the WO is taking steps to improve  communication with whistleblowers, it is missing an opportunity to provide  information to the whistleblower community that could potentially reduce  burden on the WO and alleviate workload. While the WO has procedures and policies in  place to protect whistleblower identities, we found instances of  whistleblower identities being at risk for disclosure. First, in our review of closed claim files we found that the WO has sent  sensitive whistleblower mail to incorrect addresses. Further, on at least one of these mailings, the IRS Whistleblower  Office was named on the return address. Tax Whistleblowers Do Not Have Legal Protections from Retaliation by Employers

Unlike other whistleblower programs, there is no law protecting tax  whistleblowers against retaliation from their employers. IRS officials support statutory retaliation protections for tax  whistleblowers. However, IRS and the WO could make  additional changes to improve timeliness, ensure the accuracy of award  payments, expand communications, and increase protections for  whistleblowers. Such information should include an outline of the entire claim review process, with an average time  or time range for the various review steps; a description of the key taxpayer rights that a taxpayer may  exercise and how much time this may add to a claim’s review; examples to illustrate common circumstances that result in  denials; and  items to include in a Form 211 submission, and suggestions for  the types of documentation that are particularly helpful to the WO. 2. Key contributors to this report are listed in  appendix V.

Appendix I: Objectives, Scope, and Methodology

This report (1) describes the steps, timeframes, and staffing levels in the  whistleblower claims process, including the Whistleblower Office’s (WO)  staffing strategy for improving efficiency, and assesses how whistleblower  claims are prioritized within Internal Revenue Service’s (IRS)  investigation, examination, and collections workloads; (2) describes the  high-dollar 7623(b) whistleblower awards and assesses how the WO  determines these awards; (3) evaluates the WO’s role in managing the  whistleblower claims process and communicating with the whistleblower  community; and (4) evaluates how the WO safeguards whistleblower  identities and protects whistleblowers from retaliation. We also reviewed IRS’s internal and  external communications plan, including WO’s two fact sheets for external  communication, and interviewed WO staff involved with implementing the  strategy.
Why GAO Did This Study

Tax whistleblowers who report on the underpayment of taxes by others have helped IRS collect almost $2 billion in additional revenue since 2011, when the first high-dollar claim was paid under the expanded program that pays qualifying whistleblowers a minimum of 15 percent of the collected proceeds. These revenues help reduce the estimated $450 billion tax gap—the difference between taxes owed and those paid on time.
GAO was asked to review several aspects of the whistleblower program. Among other things, this report (1) assesses the WO claim review process, (2) assesses how the WO determines awards, (3) evaluates how the WO communicates with external stakeholders, and (4) evaluates IRS's policies and procedures for protecting whistleblowers. GAO reviewed the files of all 17 awards paid under 26 U.S.C. § 7623(b) through June 30, 2015; reviewed IRS data; reviewed relevant laws and regulations, and the WO's policies, procedures and publications; and interviewed IRS officials, five whistleblowers that independently approached GAO, and nine whistleblower attorneys who were recommended by IRS or other attorneys.

What GAO Found

The Internal Revenue Service (IRS) Whistleblower Office (WO) is responsible for processing thousands of tax whistleblower claims annually for two related whistleblower programs: for claims of $2 million or less, the 7623(a) program, and for claims over $2 million, the 7623(b) program. The whistleblower claim review process takes several years to complete, and GAO found that the WO is not using available capabilities to track and monitor key dates in its claim management system. Without available information on key dates related to award review and payments, the WO is unable to assess its performance against timeliness targets and risks unnecessarily delaying award payments.
Between fiscal year 2011 and June 30, 2015, the WO awarded over $315 million to whistleblowers—the bulk of which was for the 7623(b) claims, which were first paid in fiscal year 2011, 4 years after the program started. In a review of the 17 paid 7623(b) award claim files, GAO found that the WO made errors in determining some awards, resulting in over- and underpayments totaling approximately $100,000. In response to errors, IRS began corrective actions, including ensuring total collected proceeds are verified before making award payments. However, the WO has not documented this new procedure, putting it at risk of making additional errors in award payments.
The WO's communication with stakeholders, including whistleblowers, is limited due to delayed annual reports to Congress, incomplete data, and limited program information for whistleblowers. Delays in issuing the annual reports have resulted in last minute revisions that introduced discrepancies and inconsistent reporting periods that preclude year-over-year comparisons. The WO is addressing some data gaps and has published two fact sheets to provide more information to the whistleblower community; however, the fact sheets do not include information on key aspects of the program, such as time ranges for steps in the review process. Until changes are made to the annual report and fact sheets, the utility of these publications is limited.
IRS and the WO take steps to protect whistleblowers and the information they submit, but GAO found gaps in IRS and WO procedures. For example, the WO did not have documented controls in place for sending mail, and at least once sent sensitive mail to an incorrect address that also had a return address indicating the letter was from the WO. This potentially compromised the identities of whistleblowers. The WO has said it has since changed how they label return addresses, but has not documented this policy. Further, tax whistleblowers do not have statutory protections against retaliation from employers. IRS and the whistleblower community support such protections, noting that inadequate protections may discourage whistleblowers from coming forward.

What GAO Recommends

Congress should consider providing whistleblowers with legal protections against retaliation from employers. GAO makes ten recommendations to IRS including, tracking dates, strengthening and documenting procedures for award payments and whistleblower protections, and improving external communications. IRS agreed with our recommendations.