The 2023 Annual Report from the IRS Whistleblower Office, while not breathless reading, has evolved from a short, dry affair, to a nicely organized and, more importantly, significantly more informative document.
Even better? The report includes some real bright spots for the program that show that it is continuing to improve and grow toward its full potential as a tool for tax enforcement.
The single best fact for showing the Office’s improving commitment to incentivizing whistleblowers is contained in one trend:
“Awards paid as a percentage of proceeds collected increased from 14.7% in FY 2021 to 21.9% in FY 2022 and 26.3% in FY 2023.”
To unpack that a little, the statute permits awards ranging from 10-30%, to be assessed based on various factors that you can think of as roughly approximating the contributions of the whistleblower. While the IRS has done its best to systematize the factors, any measure like this will always include an enormous amount of subjective judgment.
The recent upticks in award percentages, while hardly determinative of the future, appear to be a sign that the Office’s positive comments about whistleblowers are not merely lip service. They really do want to encourage whistleblowers to come forward, and rewarding those who have already taken the risk and put in the effort is one of the best ways to do that.
At the same time as this improvement in the magnitude of individual awards, the program showed improvement in another key metric. The amount of awards continued recovering from prior historic lows, and the number of new claims is also increasing, reflecting perhaps greater faith among whistleblowers in the program.
On the award front, this graph from the report shows the recovery from a run of weaker years in the past:
As you can see, in 2023 the IRS program paid out more than double what it had in either of the prior two years, with awards returning to their 2020 level. Future reports will tell us whether this is an ongoing improvement, but it bodes well for the future.
And whistleblowers have noticed, flocking to the program in increasing numbers. Indeed, in the last fiscal year, the program saw almost 6500 submissions, more than 25% higher than in the prior year.
(The program also reported a nearly 35% increase in the number of individual claims built, which is a metric roughly correlating to the number of specific taxpayers targeted by the tips in question. That tends to be more variable and could also reflect administrative shifts in how claims are divided.)
All in all, a good report for the IRS program, showing some signs of improvement. If the Office continues to display its recent recommitment to the enormous benefits whistleblowers bring to enforcement, it could realize its full potential as one of the most important tools to uncover tax fraud.
Learn more about the program here, or contact one of our attorneys.
