U.S. Tax Whistleblowers Snag Record $125.4 Million In Payouts Last Year

The U.S. Internal Revenue Service (IRS) last year paid a record $125.4 million to whistleblowers who provided evidence of tax cheating, reported Reuters on Wednesday, though most of the sum went to a former UBS banker who reported on his firm’s misdeeds.

According to an IRS statement, 332 whistleblowers had come forward in fiscal year 2012, compared to 312 the year before, though the number was still well below the high water mark of 472 in 2009.

The U.S. Internal Revenue Service (IRS) last year paid a record $125.4 million to whistleblowers who provided evidence of tax cheating, reported Reuters on Wednesday, though most of the sum went to a former UBS banker who reported on his firm’s misdeeds.

According to an IRS statement, 332 whistleblowers had come forward in fiscal year 2012, compared to 312 the year before, though the number was still well below the high water mark of 472 in 2009.

Collections from the whistleblower program however saw a massive jump from $48 million in 2011 to $592.5 million – thanks to a testimony from ex-UBS employee Bradley Birkenfeld, who had revealed to authorities that the Swiss bank helped wealthy Americans hide their assets abroad.

Birkenfeld received nearly $104 million for his efforts, or roughly 80 percent of the total IRS payout. His statements, from 2009, also paved the way for a settlement between the U.S. government and UBS – under which the bank agreed to pay $780 million in penalties and turn over the account information of thousands of U.S. clients.

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Despite the increase, most analysts however believe that the amount of awards to be paid out in fiscal 2013 will see as much dramatic growth as in 2012. In fact, the federal collection agency is just now paying the first awards since the whistleblower program was revamped in 2006, with only five claims being paid under the revised law.

After 2006, whistleblowers who provide the IRS evidence of unpaid taxes in excess of $2 million are entitled to collect up to 30 percent of the sum recovered. The process however often takes years to see results, as offenders can multiple chances to appeal. According to Yahoo Finance, the average appeal can take about eight months, while the longest recorded took nearly three years.

Senator Charles Grassley, an Iowa Republican who co-authored the 2006 overhaul, urged the IRS to expedite the process, warning that the low number of new whistleblowers over the past two years was “alarming”.

“Instead of rushing to raise new revenue through tax increases, as the President wants, the government should work with whistleblowers to collect taxes that are due under current tax levels,” Grassley said. “I’m concerned that the delay in awards and the way the IRS treats whistleblowers might be contributing to the leveling off of whistleblower cases.”

[quote]“The IRS has made some progress in processing and tracking claims, but whistleblowers are still left in the dark for years. The IRS needs to do a lot more to give whistleblowers the confidence they need to take the risk of coming forward to expose tax fraud,” he added.[/quote]

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