Earlier this year I saw Stranger than Fiction, which is a great movie about an IRS tax agent played by Will Ferrell who plays a really nice and honorable person. Just the name of the movie and the dichotomy of a likeable IRS auditor was humorous. Not that I think every IRS tax agent is bad, but they are scary nonetheless. Earlier this week, I met the Director of the new IRS Whistleblower program, Mr. Stephen Whitlock, at the TAF Conference in D.C. In an earlier post on this Whistleblower Law Blog, I wrote about Mr. Whitlock in his new role. At the TAF Conference he explained the the new IRS Whistleblower program. Mr. Whitlock is an impressive person at all levels. Not only is he likeable, but he is competent, articulate and displays unusual candor as to what he actually knows and what is still up in the air under the new law.
As a quick history: the IRS has had a whistleblower program in place for many years. It is a relatively unknown, unused, and unloved program. It gave huge discretion of the IRS on who qualified as a relator and how much, if anything, a relator would be paid for their information. In 1998 at the height of IRS abuse allegation, the Senate started examining the program. Senator Harry Reid then named the unknown program "Rewards for Rats".
Isn't it interesting how time and a revised frame can color the lens of what is happening. In 1998 the frame was overly aggressive IRS. People believed the IRS auditor and investigators were unjustifiably harassing the poor citizen/public for minor tax inconsistencies. This led to some internal reforms at the IRS for better public relations.
However, time changes the lens. By 2005 people realized major corporations were creating illegal schemes to avoid paying taxes. New efforts were placed into reviving the unknown whistleblower program for the IRS. The effort was led by the well-loved patron saint of whistleblowers and strong anti-fraud Republican Senator Charles (Chuck) Grassley. Senator Grassley felt that a whistleblower was a patriot infused with the courage to risk losing their jobs by "exposing fraud, waste and abuse in an effort to protect not only the health and safety of the American people but the federal treasury and the taxpayer dollars." (Senator Grassley's floor statement at National Whistleblower Week 2007). Now that is a far cry from Senator Reid's "Rate" analogy.
With words like that, who could resist passing a new program (created in 2006) to encourage the patriotic act of blowing the whistle on tax cheats? Well, they didn't want to prosecute just your basic low value tax cheat. The IRS wants to go after high value tax cheats. Therefore, they put some parameters on the new program that would keep low value claims at a minimum. The threshold is that the tax fraud must add up to more then $2,000,000.00 and the net earnings of the tax cheat must be in excess of $200,000 in the year the fraud occurred. This threshold will hopefully keep nutty neighbors from reporting other nutty neighbors just to be vindictive of some dog droppings on the one neighbor's lawn.
As it turns out, the IRS is already prosecuting these claims. The program rolled out and the regs were supposed to be done by the end of August, which didn't happen. Mr. Whitlock assured the TAF conference attendees that he and his team were working on them. However, until that time, he and three other national processors are reviewing the claims and dolling out the work to IRS field agents. In fact, they have already paid some pretty big claims out to relators in the past year.
After his seminar speech I found myself with a new respect for the IRS and their agents. I found that if the agency is as sincere and bright as Mr. Whitlock, that this program is going to work well.
Actually trusting the IRS. Now that is Stranger than Fiction.