The Internal Revenue Service Whistleblower Office announced that it paid a record $125.4 million in 2012 to whistleblowers that provided evidence of tax cheating, but new rule changes place future recoveries at risk.  The IRS report, which was made public on Wednesday, stated that more than 80 percent of the total paid out by the IRS in 2012 went to Bradley Birkenfeld, a former employee of UBS AG who received $104 million.

In total, the IRS issued 128 whistleblower rewards for the 2012 fiscal year, though just 12 of those cases involved more than $2 million in unpaid taxes.  Whistleblowers helped the IRS collect more than $592 million.  

However, proposed rules to the IRS whistleblower law are drawing criticism from the NWCU.S. Sen. Grassley and others. The IRS’s proposed rules will make it harder for whistleblowers to collect awards and limit the scope of cases that qualify for awards. 

The IRS is seeking public comment until Feb. 19 on the proposed rules. You can learn more about the issues that are being criticized and submit a comment by clicking here.

The National Whistleblower Center has criticized the IRS whistleblower program for moving too slowly and being given inadequate resources, causing whistleblowers to grow reluctant to file claims, Here and Here.  

The IRS Report indicated that the number of taxpayers coming forward to report tax fraud has declined in the past two years.

Senator Charles Grassley, R-Iowa, a vocal critic of the problems at the IRS Whistleblower Office, called the report’s low number of new whistleblowers "alarming" in that it showed a drop and leveling off in the number of whistleblowers coming forward for the past two years. Sen. Grassley further stated in his response to the IRS report:

“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. 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.  Unfortunately, the regulations proposed in December are likely to contribute to a drop-off in whistleblowers coming forward. 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.”