The Senate Finance Committee approved the Taxpayer Protection Act of 2016 this week, which reforms the Internal Revenue Service’s communications with whistleblowers as well as protects taxpayers from identity theft and tax fraud. The bill will now go before the full Senate for approval.
The reforms of the IRS whistleblower program include:
- Allowing the tax regulator to exchange information with whistleblowers when it would help the investigation.
- Extend anti-retaliation provisions for whistleblowers to the IRS program.
- Requiring the IRS to notify whistleblowers of the status of their claims.
In a statement, Senator Grassley said that the “IRS needs to put out the welcome mat for tax fraud whistleblowers …”
The tax whistleblower protections against retaliation have been identified annually by the IRS in a report to Congress as a recommended improvement. Although President Obama has included this change in his annual proposed budget, it has yet to be adopted. As soon as we get the language of the proposed law that passed through committee, we will add the details.
Since 2007, whistleblowers have helped the IRS collect more than $3 billion in taxes and the agency has awarded more than $400 million to whistleblowers. Yet, the program has been heavily criticized due to a lack of communications and limited award announcements to date.
We’re excited to see the text of the bill but recognize that there is a long way to go still. A separate bill is working its way through the U.S. House of Representatives. If both pass, the House and Senate will need to reconcile any differences between the two versions so it may not include all of these provisions for whistleblowers.
One of the more controversial dropped provisions from the Senate version in the Senate Committee was the section which gave the IRS the ability to regulate tax preparers. In 2013, the federal courts invalidated the regulation of tax preparers by the IRS in Loving v. IRS because Congress did not provide authority for the agency to mandate tax preparers fulfill testing and continuing education requirements.
If you have questions about this law or the measures discussed, please call 1-800-590-4116 to speak to one of our IRS whistleblower attorneys.