The Treasury Department just released a 22 page report that outlines an initiative which aims to generate an additional $700 billion of revenue over the next 10 years, and this initiative is linked to spending an additional $80 billion on the Internal Revenue Service in the area of enforcement. The New York Times has a good summary of the plan, whose implementation of course is dependent on Congress allocating those additional resources, which is intended to help close the “Tax Gap” or the difference between taxes owed and taxes voluntarily paid to the U.S. every year. According to the Times:
“The scale of the tax gap remains a subject of debate. Charles Rettig, the I.R.S. commissioner, suggested recently that $1 trillion owed to the government is not being collected every year. The Treasury Department estimated on Thursday that in 2019 the tax gap was $584 billion and is on pace to total $7 trillion over the next 10 years.”
In short, the IRS is planning to hire revenue agents to work on audits, particularly of high net worth taxpayers; modernize computer systems; penalize aggressive promoters and bad preparers; and expand information reporting requirements to provide data that will lead to more revenue collection.
What about the IRS Whistleblower Program though? We believe that ANY increase in the hiring or retention of agents to work on audits is a great thing – if not THE most important part of money the IRS spends – which will help facilitate the effective use of whistleblower’s information. The diminishing budget of the IRS over the last 10 years has crippled their ability to audit taxpayers. Look no further than the reduction of IRS audit rates as proof of this. The Corona virus also had a negative impact on audit effectiveness, as did pressure on the remaining IRS agents to close cases faster in an effort to maintain their growing caseload levels. But as we recover from the pandemic and agents get back to work and new agents are trained up and come online, we expect to see increases in audit rates once again. This will greatly help whistleblower cases get the attention they deserve.
Whistleblower cases deserve attention because they drastically decrease the amount of time the IRS spends looking for issues that non-compliant taxpayers have exposure on, as well as helping them find taxpayers who are trying to avoid detection from the IRS in the first place. See TIGTA Report 2006-30-092 at pg. 5
For a present or future whistleblower, having a robust IRS enforcement arm is a critical component of success. Whistleblowers must still however target and tailor their submissions to appeal to the IRS’ current enforcement resources and initiatives as both a technical/legal and practical/resources matter. That analysis, process, and presentation of a whistleblower’s information to the IRS to target those two key considerations is the crucial role of experienced tax counsel in a whistleblower case.
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