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We resent any encounter with IRS agents. If you have ever been audited by an IRS agent, then you obviously don't look forward to another meeting. They have a way of reminding you how insufficient your paper work is or even worse, may make you seem like a totally ignorant person of the law. Well, this time round, the taxman is wearing the same shoes after the Government Accountability Office (GOA) recently released a damaging report on the expanded IRS Whistleblower program.

The report accuses the IRS of dragging its feet in the program, failing to keep track of its records as well as lacking a clear picture of what was actually happening.

According to the GAO, by April 2009, only one third of submitted claims within the first two years of the stepped up routine had been resolved. In a cover letter to the Senate Finance Committee, the GAO claimed that only a meager number of awards had been awarded. Equally small was the 15% bounty money paid out to informants (set by Congress). The IRS is said to have failed to provide Congressional investigation with the sum amount on the ground that such an action would amount to invasion of privacy.

The whistle blower program involves an 8-step process of handling claims. However, the report indicates that the IRS rarely reaches the eighth step that involves the payment of awards as stipulated

In its defense over the alleged slow vetting process plus the invisible payments, the IRS told the GAO that the bounty is only paid at the time the money is collected. Further to that, the taxman points out that there is a policy that provides for a two-year grace period, just in case some taxpayer all the same demands for a refund.

Further to that, the report alleged the IRS seems not to be bothering to update the IRS database with the provisional status of the cases. This is said to result in lack of conclusive data on the duration the claims take at each of the eight steps of the review process. This makes it impossible to establish the apt review time targets.

More to that, 28% of the Whistle blower awards are now withheld against the whistleblower's tax liability by the IRS. This is irrespective of the large legal fees paid to lawyers by numerous informers to press their claim.

In its recommendation, the GAO asked the IRS to keep its information on check. The IRS took this recommendation positively and promised to look into it.

Further to that, there was an indication in the report that ever since the Whistle blower's rights were strengthened by the IRS, tips have been on the rise with 9,500 reward-seeking tips reported so far. Mentioned in the report were the unsuccessful attempts by William Prentice Cooper III, a Tennessee lawyer, had tried to blow the whistle of his widowed girlfriend on allegations that there had been tax maneuverings of the descendants of the prominent Wall Street financier Clarence Dillon, a family she had been married into. The U.S. Tax Court, in what gave the impression of reversing of an earlier verdict, stated that it lacked the authority to overrule the IRS judgment when no money had actually been collected.

Cooper had alleged that the Dhillon family had evaded $100 million in estate taxes by not mentioning a 1918 trust put up by Dhillon in person and failing to pay a large generation-skipping tax. The IRS said in its court filing that it had gone through the claim and reached the conclusion that there had been no tax due. Dhillon family was not a party of the proceedings but a family spokesperson noted that the IRS had accepted the estate tax returns.

It is because of this case that the GAO questioned whether the future whistleblowers may ever understand the reasoning behind the rejection of their claims. We just hope that the IRS learns from its past mistakes and improves on the whistleblower program.

Rob L Daniel and partners of Limon Whitaker & Morgan, for years have helped businesses and individuals Nationwide, with their delinquent IRS & State tax problems. The firm is based in Los Angeles, California USA. http://www.limonwhitaker.com Tel: 888.321.6188

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By Rob L Daniel
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