IRS Whistleblower Office Issues Annual Report

The IRS's Whistleblower Office has released its FY 2010 annual report to Congress:

During FY 2010, the IRS received 431 whistleblower submissions relating to 5,429 taxpayers11 that appeared to meet the $2 million of tax, penalties, interest, and additions to tax threshold in § 7623(b). ... The number and amount of awards paid each year can vary significantly, especially when a small number of high-dollar claims are resolved in one year (as was the case in 2006 and 2008).

One factor contributing to the lower award payments in FY 2009 was a change in the IRS definition of the point at which proceeds in a tax case are available to make an award payment. In the past, the IRS monitored the tax case to ensure that it collected proceeds before processing the award claim. Where the taxpayer filed an administrative or judicial appeal, the IRS did not pay claims until the court finally resolved the appeal. After consultation with the Office of Chief Counsel, the IRS determined that it should not pay claims even when the taxpayer has not filed an appeal until the period for filing an appeal has lapsed. The general rule is that a taxpayer may file a claim for refund within two years of the last payment, unless he or she has waived that right. Thus, beginning in July 2009, the IRS monitors cases for both collection and the lapse of the period for filing a claim for refund. As a result, the IRS did not pay some claims that it would have otherwise paid in FY 2009 until FY 2010 or FY 2011.