If you receive an IRS whistleblower award during the next two years, you will get less than the percentage you are awarded by the Internal Revenue Service. As a result of budget bills imposing sequestration on federal agencies, IRS awards for FY2015 are being reduced 7.3% and FY2016 awards (from October 1, 2015 to September 30, 2016) will be reduced 6.8%, which is the federal budget sequestration rate for the next fiscal year.
Why is there a sequestration rate?
The Budget Control Act of 2011 put in place automatic spending cuts for particular categories within federal government spending in 2013 because the government failed to produce legislation that would decrease the budget deficit. The sequestrations required cuts in both defense and domestic spending, with certain areas exempt or subject to reduced payment withholding. Although the government limited sequestration imposed on the spending of certain programs in 2014 and 2015, the IRS was not among them.
How does this impact whistleblowers?
It is the fourth year in a row that the Internal Revenue Service has reduced rewards for whistleblowers because of the government’s adoption of sequestration. The practical effect of the sequestration rate is that IRS whistleblower awards under section 7623(b) will in reality pay between 14 and 28 percent of the tax noncompliance collected.
This isn’t the only potential impact of the government’s budget battles on tax whistleblowers. The IRS has also had significant budget cuts since 2010. The tax agency’s budget for 2015 is 10% below the level Congress appropriated to it in 2010. This summer, the House Appropriations Committee’s fiscal year 2016 budget proposal provided for just $10.1 billion to the IRS, which is $838 million below the FY2015 funding and $2.8 billion below the amount requested by President Obama’s administration. As a result of these budget cuts and insufficient personnel, the IRS is pursuing fewer enforcement actions.
The practical impact of this is unclear – some would contend that a government agency strapped for cash should rely on whistleblower information more than normal when it would have money to generate its own investigations. However, at some point the tight budget could limit the number of cases the government can pursue and so some whistleblower tips might ultimately go under-investigated or unenforced due to the lack of a budget to pursue them. Since there was extensive criticism of the IRS handling of the whistleblower program a few years ago, it is possible that the tight budget contributed to it.
If you have questions about this or another aspect of the IRS whistleblower program, feel free to contact one of our tax whistleblower attorneys via our contact form or by calling 1-800-590-4116. Our law firm offers a free, confidential initial legal consultation with a lawyer for whistleblowers.