IRS Whistleblower Program: Billions Collected, but Timeliness and Communication Concerns May Discourage Whistleblowers
Published: 2015-10-29T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Tax whistleblowers who report on the underpayment of taxes by others have helped IRS collect almost $2 billion in additional revenue since 2011, when the first high-dollar claim was paid under the expanded program that pays qualifying whistleblowers a minimum of 15 percent of the collected proceeds. These revenues help reduce the estimated $450 billion tax gap—the difference between taxes owed and those paid on time.
GAO was asked to review several aspects of the whistleblower program. Among other things, this report (1) assesses the WO claim review process, (2) assesses how the WO determines awards, (3) evaluates how the WO communicates with external stakeholders, and (4) evaluates IRS's policies and procedures for protecting whistleblowers. GAO reviewed the files of all 17 awards paid under 26 U.S.C. § 7623(b) through June 30, 2015; reviewed IRS data; reviewed relevant laws and regulations, and the WO's policies, procedures and publications; and interviewed IRS officials, five whistleblowers that independently approached GAO, and nine whistleblower attorneys who were recommended by IRS or other attorneys.
section_title: What GAO Found
paragraphs: The Internal Revenue Service (IRS) Whistleblower Office (WO) is responsible for processing thousands of tax whistleblower claims annually for two related whistleblower programs: for claims of $2 million or less, the 7623(a) program, and for claims over $2 million, the 7623(b) program. The whistleblower claim review process takes several years to complete, and GAO found that the WO is not using available capabilities to track and monitor key dates in its claim management system. Without available information on key dates related to award review and payments, the WO is unable to assess its performance against timeliness targets and risks unnecessarily delaying award payments.
Between fiscal year 2011 and June 30, 2015, the WO awarded over $315 million to whistleblowers—the bulk of which was for the 7623(b) claims, which were first paid in fiscal year 2011, 4 years after the program started. In a review of the 17 paid 7623(b) award claim files, GAO found that the WO made errors in determining some awards, resulting in over- and underpayments totaling approximately $100,000. In response to errors, IRS began corrective actions, including ensuring total collected proceeds are verified before making award payments. However, the WO has not documented this new procedure, putting it at risk of making additional errors in award payments.
The WO's communication with stakeholders, including whistleblowers, is limited due to delayed annual reports to Congress, incomplete data, and limited program information for whistleblowers. Delays in issuing the annual reports have resulted in last minute revisions that introduced discrepancies and inconsistent reporting periods that preclude year-over-year comparisons. The WO is addressing some data gaps and has published two fact sheets to provide more information to the whistleblower community; however, the fact sheets do not include information on key aspects of the program, such as time ranges for steps in the review process. Until changes are made to the annual report and fact sheets, the utility of these publications is limited.
IRS and the WO take steps to protect whistleblowers and the information they submit, but GAO found gaps in IRS and WO procedures. For example, the WO did not have documented controls in place for sending mail, and at least once sent sensitive mail to an incorrect address that also had a return address indicating the letter was from the WO. This potentially compromised the identities of whistleblowers. The WO has said it has since changed how they label return addresses, but has not documented this policy. Further, tax whistleblowers do not have statutory protections against retaliation from employers. IRS and the whistleblower community support such protections, noting that inadequate protections may discourage whistleblowers from coming forward.
section_title: What GAO Recommends
paragraphs: Congress should consider providing whistleblowers with legal protections against retaliation from employers. GAO makes ten recommendations to IRS including, tracking dates, strengthening and documenting procedures for award payments and whistleblower protections, and improving external communications. IRS agreed with our recommendations.

section_title: Letter
paragraphs: Tax whistleblowers—individuals who report on the underpayment of taxes  or on the violation of tax laws by others—potentially help the Internal  Revenue Service (IRS) collect billions in tax revenue that may otherwise  go uncollected. While IRS has had the authority to pay awards to  whistleblowers for more than a century, the Tax Relief and Health Care  Act of 2006 expanded the program to pay qualifying whistleblowers a  minimum of 15 percent of the collected proceeds for high-dollar claims.  This act also established the Whistleblower Office (WO) within IRS to  manage the whistleblower program. Proceeds collected as a result of  whistleblower information, which have totaled almost $2 billion dollars  since 2011, can help reduce the tax gap—the difference between the  amount of taxes owed by taxpayers and the amount voluntarily paid on  time. IRS estimated the net tax gap to be $385 billion for tax year 2006.
We previously reported that the lack of data about the WO’s operations  and limitations on communication between the IRS and whistleblowers  have hindered the program’s success. In response, IRS took steps to  improve the data it collects and reports and the timeliness for processing  information submitted by whistleblowers. However, the whistleblower  community, including whistleblowers and their attorneys, continue to  voice concerns that limited communication by IRS and lengthy award  processes are frustrating current whistleblowers and discouraging  potential whistleblowers. This jeopardizes the success of the program and  hinders IRS’s ability to reduce the tax gap.
You asked us to review several aspects of the whistleblower program,  including its timeliness for processing whistleblower claims,  communications with whistleblowers, and award payments. This report  (1) describes the steps, timeframes, and staffing levels in the  whistleblower claims process, including the WO staffing strategy for  improving efficiency and assesses how, if at all, whistleblower claims are  prioritized within IRS’s investigation, examination, and collections  workloads; (2) describes the high-dollar whistleblower claim awards and  assesses how the WO determines these awards; (3) evaluates the WO’s  role in managing the whistleblower claims process and in communicating  with the whistleblower community; and (4) evaluates the WO and IRS  policies and procedures that safeguard whistleblower identities and  protect whistleblowers from retaliation.
To describe the steps and timeframes in the whistleblower claims  process, we reviewed IRS guidance, including IRS’s Internal Revenue  Manual (IRM) on whistleblower claim processing and IRS management’s  expectations for timeliness. To assess how often IRS met its timeliness  goals, we reviewed IRS data on how long IRS took to process these  steps and interviewed IRS officials responsible for completing these  review steps. We identified several weaknesses with E-TRAK, the  whistleblower data system, but determined that these data were reliable  for the purposes of our review. We also interviewed WO officials  concerning the implementation of the WO’s staffing strategy in light of the  reduced fiscal year 2015 budget. To assess how whistleblower claims are  prioritized within IRS’s workload, we reviewed IRS guidance, including the  IRM and WO guidance to the operating divisions (OD), and interviewed  officials within the four ODs that process whistleblower claims—Large  Business and International (LB&I), Small Business / Self-Employed  (SB/SE), Tax Exempt and Government Entities (TE/GE), and Criminal  Investigation (CI). We compared the procedures used in an investigation,  examination, or collections case with a whistleblower claim to procedures  used for a case without a whistleblower claim and identified the  differences.
To assess how the WO determines awards, we reviewed section 7623 of  the Internal Revenue Code and the implementing regulations, and the  IRM section that specifies the process and criteria for determining  whistleblower awards. We reviewed the claim files for all 17 awards paid  under the expanded whistleblower provision (known as 7623(b) or high-  dollar claims) through June 30, 2015 to determine how the WO  established awards, what criteria were used, and whether awards were  calculated correctly. To evaluate the role of the WO in monitoring  whistleblower claims, we reviewed the IRM and WO guidance, and  interviewed WO and OD officials responsible for whistleblower claims.
To evaluate how the WO communicates with the whistleblower  community, we reviewed relevant regulations covering confidentiality and  disclosure of information issues. We reviewed IRS’s internal and external  communications plan and interviewed WO staff involved with  implementing the plan. We also interviewed a non-generalizable sample  of five whistleblowers and nine whistleblower attorneys for their  perspectives on IRS’s communications with whistleblowers. We selected  these whistleblower attorneys based on their participation in our prior  report, their varied experiences with the WO, and on recommendations of  others within the whistleblower community. We also spoke with five  whistleblowers who contacted us as willing to speak, either on their own  or through their attorney; due to confidentiality concerns, we did not reach  out directly to any whistleblowers.
To evaluate how the WO safeguards whistleblowers’ identities and  protects whistleblowers from retaliation, we reviewed IRS guidance,  including the IRM, on what steps the WO and ODs take to keep  whistleblower identities confidential. We interviewed WO and OD officials  about key controls for safeguarding information and about the potential  weakness of such controls. We reviewed IRS and the Department of the  Treasury’s legislative proposals on retaliation protections for tax  whistleblowers. We also interviewed whistleblowers and whistleblower  attorneys to discuss the usefulness and potential benefits of employer  retaliation protections. For additional information on our scope and  methodology, see appendix I.
We conducted this performance audit from October 2014 to October 2015  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.
subsections: section_title: Background
paragraphs: In 1867, Congress enacted legislation that allowed the government to pay  awards to individuals who provided information that aided in detecting  and punishing those guilty of violating tax laws. Initially, Congress  appropriated funds to pay these awards at the government’s discretion. In  1996, Congress increased the scope of the program to also provide  awards for detecting underpayments of tax and changed the source of  awards to money IRS collects as a result of information whistleblowers  provide.
The Tax Relief and Health Care Act of 2006 created an expanded  whistleblower award program to complement the existing whistleblower  program. We refer to the original program as the 7623(a) program and  the expanded program as the 7623(b) program after the Internal Revenue  Code subsection that authorizes the different award payments. Claims  submitted under the 7623(b) program are those that allege a tax  noncompliance of over $2 million and are subject to a mandatory award  of between 15 and 30 percent of collected proceeds, to be determined by  the WO based on the extent of the whistleblower’s contributions.  Whistleblowers may appeal an award determination under 7623(b),  including the denial of an award, in the Tax Court. Claims submitted  under the 7623(a) program are more discretionary: they are not subject to  statutory minimum award payments, are not eligible for judicial review of  award determinations in the Tax Court, and, prior to 2010, were not  subject to the same procedures for award determination as those claims  submitted under the 7623(b) program. However, IRS officials announced  in an update to the IRM that it would award and evaluate 7623(a) claims  received after July 1, 2010 by the same process it uses for the 7623(b)  program for claims submitted after the announcement. That is, 7623(a)  whistleblower claims received after July 1, 2010 will be paid between 15  and 30 percent of collected proceeds and will be based on the same  factors used to determine 7623(b) awards.
The Tax Relief and Health Care Act of 2006 also established the WO  within IRS, which is responsible for managing and tracking whistleblower  claims from the time IRS receives them to the time it closes them, either  through a rejection or denial letter or an award payment. The Secretary of  the Treasury is required to submit an annual report to Congress on the  activities and outcomes of both the original and expanded whistleblower  programs.
subsections: section_title: Growth in Staffing and Workload
paragraphs: Various functional branches comprise the WO. The Initial Claim  Evaluation (ICE) unit receives and records incoming 7623(a) and 7623(b)  claims. ICE also alerts whistleblowers to the status of received,  incomplete, and denied claims. Strategic Planning and Program  Administration has responsibility for overall program management  including program analysis, developing operating procedures, and  updating the IRM. Award Recommendation and Coordination (ARC)  reviews and issues award decisions for 7623(a) claims. Awards for  7623(b) claims fall under the responsibility of Case Development and  Oversight (CDO). CDO also evaluates potential 7623(b) claims and  coordinates the most complex cases across IRS operating divisions (OD).  Figure 1 shows WO staffing levels from fiscal year 2007 to September 15,  2015.
The WO has grown since its establishment in February of 2007 and had  61 staff on board as of September 15, 2015. The WO’s workload has also  increased over the years (see figure 2). Since fiscal year 2010, the WO  has received, on average, over 10,000 claims each year between the  7623(a) and 7623(b) programs. Further, as of May 14, 2015, the office  had 30,152 open claims in their workload with more than half of these  coming in since the start of fiscal year 2012. Over 95 percent of claims  closed between the start of fiscal year 2013 and August 5, 2015 did not  receive award payment. Each year most claims are closed early in  processing for a number of reasons, including the following: the  submission is nonspecific to taxpayer or tax issue, the submission is  unclear, or the claimant lacks credibility. The WO’s workload includes the  initial vetting of claims and the processing of the small number of claims  that result in an award. Claims that pass the initial rounds of review have  the potential to be under review for several more years and may not result  in any award. For example, a claim may not merit award if the WO  determines that the information did not substantially contribute to an IRS  action or the information resulted in no collected proceeds.
section_title: Whistleblower Claims Management System: E-TRAK
paragraphs: Launched in 2009, E-TRAK is IRS’s whistleblower claims management  information system. The WO and the ODs use E-TRAK to track the  progress of claims as they move through the review process and to store  information on the file. Our prior report found several weaknesses in E- TRAK and its ability to accurately monitor whistleblower claims and  produce reportable statistics for management use. According to IRS  officials, E-TRAK was designed to be a claim management tool to track  claim progress, not a system designed to report and monitor overall  program performance. Since 2011, IRS has made several updates to E- TRAK to better capture and report key whistleblower claims data, but  according to IRS officials, E-TRAK remains difficult to use as a system for  managing WO operations.
section_title: Whistleblower Claims Can Take Years to Process
subsections: section_title: Whistleblower Claims Go through a Multi-Step Process and Are Selected for IRS Action Based on Merits of the Case
paragraphs: Initial review and routing: The whistleblower claims process involves  multiple steps, starting with a whistleblower’s initial application and ending  with a rejection, a denial, or an award payment. The process begins when  a whistleblower submits a signed Form 211, Application for Award for  Original Information, to the WO. The first stage of the process consists of  two steps. First, the WO’s Initial Claim Evaluation (ICE) unit performs an  administrative review of the incoming applications. ICE examines the  submission for completeness and logs it into E-TRAK, the claims  management information system. Second, claims are generally sent to  staff from the Small Business / Self-Employed (SB/SE) operating division  (OD) where they are reviewed to determine whether the claims merit  further consideration by an OD or should be rejected or denied. Claims  that are identified as potential 7623(b) claims are sent to the WO’s Case  Development and Oversight (CDO) team for further review. At this stage,  the WO may reject claims because the tax noncompliance allegation is  unclear, no taxpayer is identified, or the whistleblower is ineligible for an  award. Claims can also be denied if there is no potential noncompliance  found, among other reasons. Claims are then routed to the proper OD for  further review, including Criminal Investigation (CI) if there is the potential  for a criminal investigation, or are routed to ICE which sends the  whistleblower a rejection or denial letter. The Deputy Commissioner for  Services and Enforcement has set a 90-day target for completion of these  ICE, CDO, and SB/SE review steps. WO data shows 67 percent of  7623(b) claims are processed within this time frame. WO officials said  that cases of greater complexity are more difficult to handle and so are  more likely to experience delays. In particular, they said that claims that  need coordination across ODs because of their complexity are especially  prone to delay. Figure 3 summarizes the full claim review process for  7623(b) claims.
OD SME review: The 7623(b) claims—those that allege over $2 million in  tax noncompliance—that are not rejected or denied in the initial review  are generally forwarded to OD subject matter experts (SME) for a more  rigorous review. For example, the SME may follow-up with the  whistleblower to obtain more information and will evaluate whether the  source of the information has the potential to compromise any case  developed from it. SMEs may deny claims if insufficient time remains on  the statute of limitations, among other reasons. Once claims are routed to  an OD, they leave WO control; however, throughout the claim review  process a WO analyst may monitor certain 7623(b) claims if the tax issue  involves multiple ODs or is particularly sensitive.
The Deputy Commissioner for Services and Enforcement has set a 90- day target for completion of SME reviews. However, these reviews may  take more than 90 days if the whistleblower’s information relates to a  complex tax case or has an international component and requires  documents to be translated, among other reasons. SMEs we spoke with  generally agreed that they could meet the 90-day target for most claims.  The 90-day target is just that—a target. WO and OD officials understand  there are several reasons why a SME review may take longer than 90  days. An official from one OD said that if a SME review does surpass 90  days, the WO and OD management may follow up to ensure a claim is  not sitting idle and to provide additional resources to the SME if  necessary and available. As of August 5, 2015, the WO reports that 67  percent of 7623(b) claims have met this time target since October 1,  2012.
As part of their review, SMEs may contact (or debrief) whistleblowers to  clarify information submitted with the Form 211. Debriefings also provide  an opportunity to set expectations about communication between IRS and  the whistleblower and the length of the process. In 2012 and again in  2014, the Deputy Commissioner for Services and Enforcement called for  SMEs to debrief whistleblowers unless there is a clear reason not to do  so. Debriefings can occur during the SME review or later, after the  taxpayer’s examination has started. In both instances, the SME conducts  the debriefing. The whistleblower attorneys we spoke with varied in their  estimates of how often whistleblowers were debriefed but agreed that IRS  debriefs their clients less than 50 percent of the time.
SMEs also determine the extent to which the whistleblower provided  unusable information: for example, information subject to attorney-client  privilege or illegally obtained information that may compromise IRS’s tax  case. As warranted, IRS counsel may be involved in assessing the  limitations and the risk in using the whistleblower’s information. The  SME review, including debriefings and the review for unusable  information, is a step unique to a whistleblower claim and can add time to  the whistleblower claim process.
Claims that are not denied by the SME are added to the OD’s inventory of  returns for potential selection. If the OD does not select the taxpayer(s)  identified in a whistleblower’s claim for examination, the claim is returned  to the WO for denial processing. Selecting the returns largely depends on  the merits of the case. To the extent that whistleblower information  pertains to a high priority tax issue as specified in the IRS’s annual plan,  ODs prioritize returns for examination based on the merit of the tax issue,  not on the source of the referral.
ODs use whistleblower information to identify issues and to establish  leads for obtaining documents supporting tax assessments or  collections. They develop evidence independent of whistleblower  information to support any tax adjustments or collections action. To  mitigate the risk of compromising the tax case, OD guidance specifies the  contact with whistleblowers should be conducted through the SME and  counsel, as appropriate.
Taxpayer examination and appeals: The examination, appeals, and  collection process may take several months to several years, depending  on the tax issues raised, agreement by the taxpayer, and payment. We  were able to collect data on the length of audits for twelve of the  seventeen 7623(b) claims that were paid as of June 30, 2015. The length  of this process ranged from 6 months to more than 4 years, with an  average of 2 years. Audit length can be affected by case complexity,  availability of documentation, taxpayer cooperation, and availability of IRS  resources. Taxpayer appeals also have the potential to extend the time a  claim is open. Taxpayers may pursue an appeal with the IRS Office of  Appeals, which generally takes between 90 days and 1 year to complete,  or by filing suit in Tax Court, which may take several months to over a  year to litigate. After an audit and any appeals, and if a taxpayer does not  pay the taxes owed, the case may be sent to collections, where IRS will  attempt to collect the outstanding liability from the taxpayer. Similar to  audit selection, IRS cannot pursue all outstanding collections cases, and  cases are selected based on the merits of each case and not because a  taxpayer was the subject of a whistleblower referral.
At the conclusion of the examination process, OD staff record the  contribution made by the whistleblower on a Form 11369, Confidential  Evaluation Report on Claim for Award. The OD sends the Form 11369 to  the WO along with any supporting documentation from the OD and with  the original documentation provided by the whistleblower. According to  IRM provisions and direction from the Deputy Commissioner for Services  and Enforcement, the ODs should purge any documentation that  identifies the existence of a whistleblower from the taxpayer’s file.
Waiting period and award determination: Using information supplied  by the OD in the Form 11369, the WO analyst assesses how the  whistleblower’s actions contributed to the IRS action and determines  whether to recommend an award. If an award is recommended, the WO  analyst determines an award percentage, which is applied to the total  collected proceeds to calculate the final award payment. However, the  WO only calculates the award once collected proceeds are final, which  occurs after the expiration of any remaining appeals rights of the taxpayer  and the right to request a refund. The refund statute expiration date  (RSED)—which extends at least 2 years from the date of the last  payment made by the taxpayer to settle the tax liability related to the  whistleblower’s claim— is the date at which IRS has what it considers to  be finalized collected proceeds. The WO does not pay awards before the  RSED to avoid paying an award on proceeds that could later be returned  to the taxpayer. In rare cases, the WO may pay an award earlier than  this, such as when IRS and the taxpayer sign a comprehensive closing  agreement waiving refund rights and immediately finalizing the collection  amount.
Once the collected proceeds are finalized, the WO calculates the award  and sends a preliminary award package to the whistleblower. The Deputy  Commissioner for Services and Enforcement sets a 90-day target  beginning at RSED for sending the preliminary award package. This  package summarizes the award calculations and the factors used to  determine the award percentage.
Award payment: After receipt of the awards package, whistleblowers  have the option to accept the award as calculated; submit comments to the award file; or  request a review of the full file to see how the award was  determined.
The WO will review any comments submitted by whistleblowers before  making a final award determination and sending the award payment.  Whistleblowers who disagree with how an award is determined can  dispute the award in Tax Court if raising concerns with the WO does not  provide relief. Exercise of the review or comment options will lengthen  the time to award payment.
In our review of the 17 paid 7623(b) claims as of June 30, 2015, we found  that claims took 4 years to 7½ years from the submission of the Form 211  to the award payment. Much of this time was spent with the WO. For  example, from the time the OD completed and sent the Form 11369 to  the WO for award evaluation, it took between 1½ to 4½ years for claims  to be paid.
Only a very small percentage of claims submitted have closed with an  award payment. For example, between fiscal year 2013 and August 5,  2015, only 507 whistleblower claims (or less than 5 percent of 7623(a)  and 7623(b) claims) closed with an award payment. During the same  period 19,757 claims were closed with no payment. As described above,  the WO can deny or reject claims at each point in the process before  award payment. Table 1 summarizes the frequency of various reasons for  claim closures. See appendix II for information on which office or OD  made the closure decision.
section_title: Resource Allocation Decisions Based on Limited Staff Resources Have Contributed to Workflow Backlogs and Delays
paragraphs: Recent reductions to IRS’s budget have necessitated most divisions and  offices make do with fewer resources. The WO is not an exception.  While the office has been able to grow its staff since 2007, this growth  has not kept pace with the workload. The WO has studied its workflow to  identify opportunities to more efficiently use staff through a consolidation  of processes. While a number of these proposals show promise, IRS has  put implementation on hold while it reconsiders staffing allocations in light  of its budget. Because the current process is dispersed across three  different units (each with their own staff allocations), any consolidation  might save staff days across the agency, but would likely require staff  increases wherever the functions were consolidated. As such, decisions  on this consolidation need to be made while considering IRS’s overall  budget and agency-wide resource allocation. Not implementing these  changes has at least partially contributed to workload backlogs—more  than 11,000 cases—in three areas: SB/SE’s initial review, the award  determination process, and processing rejection and denial letters.
First, the WO cancelled plans late in 2014 to bring on additional staff and  take over the initial review and routing duties that were being done by  SB/SE staff; this contributed to a backlog of approximately 5,000 claims.  According to SB/SE officials, the inventory of claims being sent to them  for initial review slowed as the WO prepared to take over the work.  However, those plans were contingent on IRS’s proposed fiscal year  2015 budget, which IRS did not receive. As the initial review process  returned to its original functioning, SB/SE received an influx of more than  two times the normal workload of initial review work in both the first and  second quarters of fiscal year 2015. According to SB/SE officials, they  received over 8,700 claims for initial review, which was more than the  typical amount of approximately 2,100 claims per quarter, and this  resulted in a backlog. The backlog was further exacerbated by staffing  shortfalls. According to WO officials, four to five full-time equivalent (FTE)  employees have been historically needed to complete this work.  However, according to WO officials, only 1.2 FTEs were available to do  the work at times. IRS officials told us that in the past, when staff met the  weekly time budgeted for their initial review, they set aside remaining  work until the following week.
In early 2015, SB/SE brought on 12 revenue agents as 30-day detailees  to clear the backlog, but this effort was not entirely effective. First, the  detailees were brought on before SB/SE received the influx of claims.  These detailees helped in clearing an existing backlog, but were not  sufficient in number to clear the new claims. Second, the SB/SE initial  review and WO processes have a learning curve and because revenue  agents are assigned to the WO for only 30-day periods, they may rotate  to new assignments soon after they become proficient. According to  SB/SE officials, in June 2015, SB/SE was approved to bring on 23 120- day detailees and expects to reduce the backlog by the end of fiscal year  2015. SB/SE and the WO have not yet settled on a permanent staffing  plan for these duties, but WO officials said that they have no immediate  plans to take over these duties due to budget constraints.
Second, a backlog exists in the award determination step for 7623(a)  claims. WO officials cited inadequate staffing resources and the volume  of small awards as the cause of this backlog. WO officials report that  approximately 25 percent of open 7623(a) claims (about 4,200 claims)  were with Award Recommendation and Coordination (ARC) and awaiting  review of Form 11369 as of July 28, 2015. This is the same level of  backlog reported by WO officials in March 2015. WO officials said they  brought in 120-day detailees to assist, but the detailees could not be  adequately trained within the 120-day window to clear the backlog.  Further, two permanent ARC staff left their positions. WO officials told us  they anticipate doing additional hiring to clear the backlog. On September  15, 2015, a WO official told us the office had hired six additional ARC  staff and most had already reported for duty, for a net increase in ARC  staff to four.
Third, the WO has a backlog of approximately 2,500 denial or rejection  letters. WO officials said the backlog resulted from the low priority given  to denial letters—the WO views getting whistleblower information to the  ODs and working on award payments as higher priority. Officials said  procedural changes also contributed to this backlog. In August 2014, the  final regulations on whistleblower awards became effective, detailing  procedures for the denial process. To implement the new regulations,  the WO drafted new language for denial letters. While the new language  was being developed and approved, the WO ordered a hiatus on new  denial notifications for 5 months, which contributed to the buildup of  denial letters. Because processing denials is a low priority and staff  resources are limited, WO officials told us they do not expect to clear the  backlog caused by the hiatus in the near future and did not provide a time  period for when they plan for this to be done.
section_title: The WO’s Claim Process Could Benefit from Consolidation, but IRS Has Not Implemented Its Streamlining Proposals
paragraphs: WO officials have studied improving the efficiency of the initial review  process. The current procedures can create unnecessary processing,  which results in an inefficient use of staff time and added cost. As  previously discussed, ICE performs the administrative processing work  and then passes the claim along to SB/SE for the initial review—that is,  SB/SE reads through whistleblower claims to identify the tax matter at  issue and determines whether and which OD should work the claim. Each  stage of review of a claim requires resources, so rejecting or denying  claims at the earliest opportunity would be efficient. WO staff told us that  in some cases it was obvious in the mail processing administrative review  that some submitted claims were not worthy of pursuit, but such claims  are moved along to ensure all claims receive a fair and honest  consideration. They told us that these claims came in with only vague  insinuations of wrongdoing and that a small number of whistleblowers  submit multiple claims of this type per month. Forty-six percent of all  claims (9,271 claims out of 20,264 claims) were closed between fiscal  year 2013 and August 5, 2015 because the allegations were not specific,  not credible, not clear, or did not identify a tax issue (see table 1).  However, the process is not set up to allow the WO ICE unit to deny such  claims. As a result, the ICE unit ends up performing administrative  functions on claims that are likely to be denied when SB/SE staff do their  initial review. The result is added costs and time to the overall review  process because claims known to be of poor quality are allowed to  advance in the process.
The WO has also studied making use of the expertise of the OD in trying  to realize efficiencies in the claim review process. Currently, SMEs  closely scrutinize claims for the significance of the noncompliance as well  as the usefulness and completeness of the information provided. As of  August 5, 2015, they referred on average about 88 percent of claims  received for examination. Because the OD’s expertise is an important  component to the scrutiny a claim receives, the WO’s plans for  consolidation have considered more extensive use of the OD. Table 2  summarizes the claims received by the SME as well as those then  referred to examination.
WO officials recognize that the staffing arrangement in place does not  match the organization’s functions and have studied their workflow and  proposed options for revising the process. One option involves making  the administrative review more substantive by consolidating SB/SE’s  review into it. The proposed initial review within the WO would evaluate  claims to determine if they merit examination and route those directly to  the ODs. This proposal would eliminate the need for the SB/SE detailees.  Additionally, WO officials expect that implementing the proposed process  could be more efficient, could reduce the opportunities for unnecessary or  inappropriate disclosure of whistleblower information, and could help the  WO retain greater control over the process, among other benefits.
Another proposal entails routing incoming submissions directly to the OD  SMEs. This proposal would give the WO an administrative role in the  claim receipt process. Each OD would then evaluate claims to see  whether they merit examination and route such claims to the examination  teams’ selection inventory. This proposal aims to give ODs greater  autonomy to evaluate and direct the claims they will work and would  reduce the number of review steps as a result. However, it will require  additional FTEs for the ODs.
Increasing efficiency can help government make better use of scarce  resources. IRS has not decided which plan, if any, to implement and  WO officials said that there were no current plans to advance any of them  at this time. WO officials said that due to recent changes in WO  management and ongoing reviews, near-term changes are unlikely.  However, on August 26, 2015, the new director said additional studies are  being conducted in several areas including those described above. Until a  plan is in place, the WO risks delaying opportunities for improving the  efficiency and quality of its reviews.
section_title: The WO Does Not Monitor a Key Date for Award Calculations, Causing Additional Delays in Award Payment and Ineffective Program Management
paragraphs: As noted earlier, the IRS only pays awards once a taxpayer waives all  rights to appeal or once these rights expire. Taxpayers have 2 years to  file a request for refund from the date the tax was paid or 3 years from the  date the return was filed, whichever is later. Except in the rare cases  where a waiver is made, the RSED marks the date on which the WO is  first able to calculate finalized collected proceeds.
Despite the importance of this date in the claims process, the WO does  not automatically track it in its claims management information system, E- TRAK—even though E-TRAK has a data field capable of tracking such  information. WO officials told us that they do not use this E-TRAK field  consistently and therefore cannot run reports showing upcoming RSEDs.  They said that E-TRAK was designed with more capabilities than the WO  uses in practice. Instead, WO analysts manually compare the cases in  their workload against a paper list of approaching RSEDs that the WO  generates on an annual or semiannual basis. One WO analyst described  his own method of tracking RSEDs since it is not done consistently in E- TRAK. WO officials said the cost of tracking RSEDs in E-TRAK going  forward would be minimal.
The lack of consistently tracked RSED information in E-TRAK  complicates the monitoring of award payments. If analysts use their own  methods to track RSEDs without documenting them, it is not possible for  supervisors to oversee their work or for another analyst to complete their  work in their absence. Our review of paid 7623(b) claim case files found  that the tracking procedures used can delay award payments. In some  cases, WO analysts documented difficulty in meeting timeliness targets.
Not recording the RSED in E-TRAK also means the WO cannot know if it  is meeting its performance goals or whether it is unnecessarily delaying  payments. As discussed earlier, the WO has a 90-day target for sending  award recommendation packages from the date that IRS can determine  finalized collected proceeds (generally the RSED). Because the WO does  not track the date collected proceeds are finalized against the date of  mailing the award recommendation package, it cannot assess its  performance against the timeliness target.
section_title: IRS Has Collected More Than $2 Billion from Whistleblower Claims since 2007, but Some Award Payments Were Miscalculated
subsections: section_title: IRS Has Paid 17 High- Dollar Claims, Half of Which Resulted in Collected Proceeds Over $10 Million Each
paragraphs: Since fiscal year 2007 (when the 7623(b) program was established), IRS  has collected more than $2 billion from both the 7623(a) and 7623(b)  programs. As of June 30, 2015, IRS had paid awards to whistleblowers  on 17 high-dollar claims of the 7623(b) program. IRS paid the first of  these claims in 2011 and expects to pay several more claims by the end  of fiscal year 2015. These 17 high-dollar claims accounted for over $1  billion in collected proceeds. About half of these claims each had  collected proceeds over $10 million. Since 2011, 7623(b) claims  constituted about 55 percent of all proceeds collected but accounted for  less than 4 percent of the number of whistleblower awards paid (see table  3).
Whistleblowers are awarded a percentage of collected proceeds ranging  from a minimum of 15 percent to a maximum of 30 percent. Of the 17  high-dollar awards paid through June 30, 2015, the majority were at the  22 percent of collected proceeds level with several at the 30 percent  maximum level. Almost 17 percent of the total collected proceeds for both  programs were paid out as awards.
The characteristics of the 17 paid 7623(b) claims varied. Over half of the  claims had attorneys representing the whistleblower. Most but not all  whistleblowers had a professional relationship with the taxpayer involved  in the underpayment. Claims involved tax issues such as not properly  reporting income, unreported offshore accounts, and employment tax.
section_title: The Award Determination Process Is Subjective, but Includes Measures to Mitigate Potential Inconsistencies
paragraphs: To determine whistleblower awards, the WO assesses the extent of the  whistleblower’s substantial contributions to a case. This process is  inherently subjective as there are no quantifiable measures for whether a  contribution is substantial. IRS regulations describe the process for  calculating awards and identify the positive and negative factors used as  criteria for award calculation. These factors, as shown in table 4, focus  on the merits of the whistleblower information and whistleblower behavior.  The factors are not weighted or exclusive; for example, other factors can  be considered in certain circumstances.
Generally, IRS first assesses the presence and significance of positive  factors to determine whether the award should be increased from the 15  percent minimum to 22 or 30 percent. Then, IRS considers the presence  and significance of negative factors to determine whether the award  percentage should be decreased. As described earlier, when ODs close  out an action related to an investigation, examination, or collections, they  document whistleblower contributions to the tax case on the Form 11369.  Complex tax cases comprising different tax issues may involve several  audit teams (for example, a case could have both international and  domestic components); each team provides separate documentation of  the whistleblower contributions to that particular issue. The WO uses all  the information to derive a final list of positive and negative factors.
In our review of 7623(b) awards, we found documentation showing two  levels of supervisory review in 11 of the 17 awards. A WO supervisor and  the WO director reviewed and approved the WO analyst’s initial award  recommendations. WO guidance does not explicitly require supervisory  review prior to the director’s concurrence; however, according to a WO  official, WO processes entail such review of the WO award  recommendations. It is not clear whether the remaining 6 cases had not  been reviewed or such reviews were not clearly documented.
The lack of quantifiable criteria for determining whistleblower awards  subjects the WO award process to potential inconsistency in making  awards. Different WO analysts may arrive at different award  determinations based on the same set of whistleblower contributions  identified by the OD. The WO mitigates some potential inconsistency by  using broad award categories. According to a WO official, few 7623(b)  awards were made each year, so WO analysts generally discussed each  one to try to ensure consistency in the award percentage  recommendation. Current WO procedures require the WO director to  approve all 7623(b) awards and 7623(a) awards over $1 million, which  reduced inconsistency. However, should the volume of high-dollar claims  reaching the award determination stage increase, as the WO expects, the  consistency of the award determinations may be affected.
section_title: WO Made Errors in Determining Collected Proceeds and Calculating Awards and Has Not Documented Corrective Actions
paragraphs: During the course of our case file review of the seventeen 7623(b)  awards, we found that the WO made errors in calculating whistleblower  awards and communicated incorrect award information to whistleblowers  in five cases. The WO identified and corrected three errors by reissuing  revised letters to the whistleblower prior to award payments. In a fourth  case, a refund check related to tax withholding was issued and then  cancelled. In the fifth case, we found the WO had miscalculated the  award and had not taken all relevant assessments, penalties, and  interests into account when determining the collected proceeds, resulting  in an incorrect payment by IRS. According to the WO, they did not use tax  assessment software in this case which resulted in a simple math error. A  WO official said the WO has been using tax assessment software to  determine award amounts since early 2014, so math errors should no  longer occur. Subsequent to our query about this case, the WO verified  all 7623(b) awards and identified two other potential errors. For two of  these three cases, the WO issued supplemental awards. In the third case,  IRS concluded that additional resources were not warranted to pursue the  overpayment. In total, these award errors amounted to approximately  $100,000.
To mitigate errors in determining collected proceeds, the WO said it has  changed its procedures to include a review of the taxpayer account at the  time of award payment to verify that any and all relevant changes in tax  assessment, penalties, interest, and other additional amounts have been  taken into account. While the award percentage can be determined soon  after the OD closes its investigation, examination, or collection action, the  award amount depends on the collected proceeds. Collected proceeds  are subject to change until there is a final determination of tax:  specifically, until the statute of limitations for the taxpayer to claim a  refund expires or until there is an agreement between the taxpayer and  IRS that waives the taxpayer’s right to file a claim for refund. On July 27,  2015, the WO e-mailed information about the new procedure to WO staff  who process award payments for 7623(b) claims, but did not disseminate  the e-mail to everyone in the WO, including those who process 7623(a)  awards until we brought the oversight to their attention on September 1,  2015. According to WO officials, the WO will be issuing an official  procedural change, but as of September 1, 2015, it has not done so.
An integral component for the reasonable assurance of the effectiveness  and efficiency of operations is through an organization’s policies and  procedures, including those for review and ensuring accountability. As  previously noted, the WO has not only communicated erroneous award  information to whistleblowers, it has also made errors in calculating award  payments. Without additional documented procedures, such as having an  additional management or supervisory review of the preliminary award  recommendation and award letters prior to their issuance, as well as  verifying the collected proceeds at the time of award payment, IRS will  remain vulnerable to communicating incorrect award information and  making erroneous award payments to whistleblowers. This is especially  important given that that IRS expects to make more high-dollar award  payments in the near future.
section_title: Whistleblower Office Communications Are Limited by Insufficient Data and Prohibitions on Disclosing Taxpayer Information
subsections: section_title: Untimely and Inconsistent Data in the Whistleblower Office Annual Reports to Congress Hinder Program Oversight
paragraphs: A key communication tool that the Secretary of the Treasury and IRS use  to inform Congress and the public about the WO and 7623(a) and  7623(b) programs is the WO’s annual report to Congress. This report is  required by the Tax Relief and Health Care Act of 2006, the same  legislation that established the WO and the 7623(b) program, and  requires the Secretary of the Treasury to conduct an annual study of  section 7623 programs, and to include in the annual report legislative or  administrative recommendations for the program. This report provides  IRS with an opportunity to discuss these programs’ operations,  challenges, outcomes, and statistics. There are no requirements for when  the report should be issued or what data the report should include.
The timing of the release of the annual reports has raised some concern.  The fiscal year 2013 annual report was issued over 6 months after fiscal  year 2013 ended and the fiscal year 2014 report was released over 8  months after the end of fiscal year 2014; the fiscal year 2014 report was  not released to the public via www.irs.gov until July 6, 2015. According to  WO officials, the WO had compiled the FY 2014 report and data by mid- December 2014, but the report could not be released until it was reviewed  within IRS, the Department of the Treasury (Treasury), and the Office of  Management and Budget (OMB). According to WO officials, IRS sent the  report to Treasury in March 2015, and the report cleared both Treasury  and OMB review on June 4, 2015. According to WO officials, these  reviews resulted in editorial but not substantive changes to the report.
The WO updated statistics in both of these reports before issuing them.  For example, the fiscal year 2014 report includes data as of May 14,  2015. According to WO officials, the WO provides the updates so the  reports reflect the status of claims closer to the report’s issuance, but a  drawback to this approach is that the annual reports do not provide a  consistent snapshot of what occurred with the whistleblower program in a  given fiscal year. As a result, monitoring the program’s operations and  results from year to year may become increasingly difficult for  congressional oversight committees and the whistleblower community.  Furthermore, last minute changes to the report have introduced  discrepancies. For example, in the fiscal year 2014 annual report, the  data in the executive summary reflects the data through December 2014,  while the data tables in the report body reflect the updated May 2015  data. Such discrepancies (which can cause confusion with readers) could  be avoided if the reported data were as of the end of the fiscal year or the  reports were issued closer to the end of the fiscal year.
In addition to questions about the annual report’s release date, concerns  remain regarding the content and presentation of data in the annual  report. We reported in August 2011 that the annual reports’ data were  limited and, for example, did not contain information on processing times  or reasons why claims were rejected. We recommended that IRS include  more information and statistics in these reports, which IRS has done with  subsequent annual reports. However, based on discussions with  program stakeholders (including some in the whistleblower community),  additional information in the annual report could make it more useful. A  key standard of internal control is communication; management should  ensure there are adequate means for communicating with external  stakeholders who may have a significant impact on the agency achieving  its goals.
Stakeholders, including congressional staff and some in the whistleblower  community, noted that the annual report can be difficult to understand  because tables are poorly labeled and terminology is not fully explained.  For example, annual reports since 2013 have included several data  tables on the reasons for claims closures, number of claims received,  status of open claims, and award payments. However, these tables do  not use a common denominator to enable the reading of information  across tables. One table shows claims received for both 7623(a) and  7623(b) programs, while another table shows the status of claims for  7623(b) claims only. Award payment information is provided by number  of award payments and readers must look to another table and past  reports to see how many claims are closed as paid. Further, the tables  include whistleblower claim process steps that are not fully explained and  can be confusing.
In addition, the annual reports do not provide data on the amount of time  it takes to process either 7623(a) or 7623(b) claims from claim  submission to award payout. The report’s one table on timing only  provides a snapshot of how long 7623(b) claims have been in a current  status as of a date on which the snapshot was taken. This table does not  provide information for how long an average claim spends in each status;  however, readers may incorrectly interpret this table as showing the  overall average time for claims to move through the process. The table  also shows the longest and shortest days for claims in each status. This  information can be misleading; readers may interpret the shortest days  column to mean that it is possible for a claim to spend one day in a given  status when in fact the data only shows that at least one claim had been  in the status only one day when the snapshot was taken.
IRS attributes some problems with data in the annual reports to E-TRAK,  as well as to other spreadsheets used to track whistleblower claims  information. As previously described, E-TRAK was not originally designed  as a management reporting system and therefore was not developed to  easily run certain data reports. The WO has made changes to E-TRAK  over time to allow for more robust data reporting, but the WO still has  problems reporting certain data in the annual reports. For example, the  WO has added some status fields to better describe and differentiate  where claims are in the review process; however, when these fields were  added, the WO did not always have the time or resources to update  claims that were already in process to the new status categories. As a  result, the annual reports have included a mix of data using the old and  new statuses that can be difficult to aggregate and interpret.
In addition, the WO is not using the full capabilities of E-TRAK; according  to WO officials, some information that is reported in the annual reports  (such as total collected proceeds) is maintained in separate spreadsheets  that do not feed into or from E-TRAK data. In the course of providing us  with data on award payments, for example, WO officials said they  discovered that this spreadsheet was not updated to properly reflect the  total collected proceeds associated with award payments. As a result,  WO officials stated that the total collected proceeds reported was  overstated and that awards paid as a percentage of collected proceeds  was understated in all annual reports dating back to at least the fiscal  year 2011 annual report. According to WO officials, this error will be  corrected for the fiscal year 2015 report for historical data and procedures  are in place to ensure subsequent data will be correct. The WO annual  report could be more useful to stakeholders and the whistleblower  community if the WO can provide reliable data showing progress and  changes across years in comparable timeframes.
section_title: Prohibitions on Taxpayer Information Disclosure Limit Information Whistleblower Office Can Share about Claims
paragraphs: IRS is limited in what information it can share with whistleblowers and  other stakeholders throughout the whistleblower claim process. Section  6103 of the Internal Revenue Code prohibits the unauthorized disclosure  of tax information. A violation of section 6103 can lead to civil and/or  criminal penalties, including imprisonment of up to 5 years. IRS takes  section 6103 very seriously; IRS does not share information with a  whistleblower about what may be happening with their claim if such  information could reveal taxpayer information, such as confirming that the  taxpayer in question is being audited.
As a result, the WO policy on providing whistleblowers updates on a  claim’s status is to state only whether the claim is open or not. Until a  rejection or denial letter has been issued or an award payment made, all  claims are considered open. Given this policy, it is possible for a  whistleblower to not hear anything from the WO for several years.  Because information provided by the WO is so limited, whistleblowers can  and do draw conclusions about progress on their claims from the contact  they do have with IRS or the taxpayer. Some whistleblowers and  whistleblower attorneys we spoke with told us they had been confident in  knowing what was occurring in their case because of insider information  from taxpayer sources, public information, or inference from limited  communications with the WO, but some were later surprised to have their  claims denied.
The Office of Chief Counsel officials we spoke with stated that  whistleblowers may infer from IRS’s silence that action may be happening  on their claim. However, if the WO were to communicate information  sufficient for the whistleblower to infer confidential taxpayer information,  then the communication could violate section 6103.
Whistleblower program stakeholders have voiced concern about this  limited communication. They reported frustrations with the limited  information IRS is willing to share with whistleblowers, especially those  that have risked their careers or safety to be whistleblowers. Some  whistleblower attorneys we spoke with stated that they are accepting  fewer IRS whistleblowers as clients or have stopped taking on such  clients altogether due to their frustration with the program. These  concerns include limited communication by IRS while claims are open,  limited communication about the process, and limited information about  what makes a good claim. As such, IRS may risk missing out on  recovering significant tax revenue when whistleblowers decide not to  come forward with information.
Officials in the WO also cited frustration with section 6103 limitations.  Officials said that they are well aware of the criticisms of the  whistleblower program, including allegations that IRS has an anti- whistleblower attitude attributed to the Office of Chief Counsel, but  section 6103 restrictions prevent WO and IRS management from directly  answering or rebutting some of these criticisms. IRS officials said they  cannot comment on pending litigation and cannot reveal facts of specific  whistleblower claims to explain certain outcomes. Furthermore, Office of  Chief Counsel officials told us that the office’s role is to represent the IRS  and provide fair and impartial legal advice, which does not entail  responding to outside criticism on behalf of the agency.
section_title: IRS Has Not Used Section 6103(n) Contracts with Whistleblowers and Does Not Have a Documented Process for Using Them
paragraphs: IRS has the authority to disclose some information with whistleblowers  under several subsections of section 6103 of the Internal Revenue Code.  Specifically, the WO has the authority under section 6103(h)(4) to share  information with whistleblowers during the award determination phase  and under section 6103(k)(6) to share information with a confidential  informant, which is typically used by CI. IRS also has the authority to  enter into a contract with an individual to share information for the  purposes of advancing tax administration, under section 6103(n).
However, according to IRS officials, IRS has not yet used these section  6103(n) contracts for whistleblowers.
Under a section 6103(n) contract, a whistleblower can, for example, work  with IRS to help an IRS examiner understand an alleged tax issue. IRS  officials have publicly acknowledged the possibility of using section  6103(n) contracts with whistleblowers, as well as the benefits of doing so.  For example, in an August 2014 memo to the commissioners of the ODs,  IRS Deputy Commissioner for Services and Enforcement stated that, with  appropriate controls, a section 6103(n) contract may be used when  disclosure of taxpayer information is necessary to obtain a  whistleblower’s insights and expertise on complex technical or factual  issues. This memo mirrored language from a June 2012 memo. IRS has  not yet used this provision for the whistleblower program because,  according to the WO and OD officials we spoke with, there has not yet  been a case where an exam team needed this provision to investigate  and build a case.
We spoke with several IRS officials from various divisions and offices,  (including the SB/SE, LB&I, and TE/GE ODs and the Office of Chief  Counsel) about the processes for evaluating the need for a section  6103(n) contract and the process for requesting authorization to enter into  such a contract. According to some of these officials, there are no criteria  or guidance for determining the need for a contract other than the  language of section 6103(n), related regulations authorizing their use, and  the Deputy Commissioners’ memos. The IRM sections related to the  whistleblower programs include one short section on 6103(n) approvals,  stating they may be used when in the best interest of the government and  that the purpose must be obtaining services for tax administration. A prior  version of the IRM stated that these would be used in rare circumstances.  The request for a section 6103(n) contract starts at the examiner level  and, if approved by the responsible executive, must be authorized by the  OD at a level no lower than the Deputy Commissioner. We did not identify  any additional guidance specific to the process for requesting and  approving a section 6103(n) contract within two of the three ODs that  handle the majority of whistleblower claims. Without clear guidance for all  examiners, IRS staff may not be using a resource available to them that  could potentially save IRS time and other limited resources.
Whistleblowers and the attorneys we spoke with argue that such  contracts could provide IRS with free help to analyze complex tax issues  and provided several examples of how such contracts could benefit IRS.  For example, one attorney said a whistleblower who has inside  information about the taxpayer could alert IRS if the taxpayer were  fabricating documentation during an examination. However, because IRS  has never entered into a section 6103(n) contract with a whistleblower,  IRS does not know whether it may be missing opportunities to collect  additional tax revenue.
section_title: Whistleblower Office Increased Information Available for Whistleblowers but Did Not Fully Describe Claim Review Process and Timeframes
paragraphs: The WO developed a fiscal year 2015 communications plan aimed at  improving how the office communicates within IRS and with the  whistleblower community. According to WO officials, this is the first  finalized and documented communications plan for the WO. One key  message to the whistleblower attorney community that this plan targets is  how to prepare a complete submission with documentation that will assist  in the processing of the claim. The WO published two fact sheets to  communicate key information about the program to whistleblowers  focused on the whistleblower claim process and how to submit a claim for  an award. WO officials told us they developed the content of the fact  sheets based on common questions they receive from whistleblowers and  their attorneys. The WO limited the fact sheets to one page each.
Our review of the published fact sheets found they did not include some  key information relevant to whistleblowers and did not provide much new  information beyond what is already available on www.irs.gov. For  example, the fact sheets do not provide any examples or specific  explanations of what is meant by key terms used in the award  determination process, particularly denials. The fact sheets (as well as  information posted on www.irs.gov and included in the annual report) do  not include a full description of the claim review process, such as a  detailed step-by-step guide that includes timeframes for steps in the  process. Additionally, the fact sheets do not include information about key  taxpayer rights and how much time that taxpayer appeals may add to the  review process, which could be helpful to the whistleblower community’s  understanding of the WO’s processes. The fact sheets state that claims  can take 5 to 7 years to complete the review process without providing  any additional information about why it may take longer. Other  information not included and that could be helpful according to  whistleblower attorneys we spoke to, is suggestions for the types of  documentation to include with a claim submission.
We spoke with whistleblowers and attorneys specializing in IRS  whistleblower claims who were unaware of some key processes in the  whistleblower claim cycle or how long the review process can take. Some  stated that the information available from IRS about the program is limited  so they rely on other resources—such as discussions with other  whistleblower attorneys—for information. For example, according to one  whistleblower attorney, several whistleblower attorneys have periodic  teleconferences to compare experiences and share information learned  about the program. One attorney who participates in these calls said they  have reached out to the Director of the WO to request he participate in a  call to discuss what attorneys can do to improve the quality of their  clients’ Form 211 submissions; the Director of the WO has neither  accepted nor declined the invitation. Attorneys also told us they have  looked to whistleblower litigation to learn more about the whistleblower  process. One attorney we spoke with stated that he appeals most claims  because the discovery phase of litigation is where he learns the most  about the program and how to improve future Form 211 submissions.
Program managers should ensure there are adequate means of  communicating with external stakeholders who may have a significant  impact on the agency achieving its goals. As the administrator of the  whistleblower program, the IRS should be the primary source of  information about the program. While the WO is taking steps to improve  communication with whistleblowers, it is missing an opportunity to provide  information to the whistleblower community that could potentially reduce  burden on the WO and alleviate workload. The fact sheets do not address  some of the key areas of concern for existing and potential  whistleblowers, including estimated timelines for steps in the review  process, guidance on best practices for submitting a successful Form  211, and specific examples of the various reasons why claims are denied.  Publicizing such information may also alleviate burdens on the WO  because whistleblowers may better understand the process.
section_title: Annual Status Letter Pilot Project Used Already Constrained Resources and Has Unknown Benefits
paragraphs: In March 2015, the WO initiated a pilot program of sending annual letters  to a sample of whistleblowers with open claims to let them know that their  claim remains open. The goals of this program are to proactively  communicate with whistleblowers and to reduce the frequency of letters,  e-mails, and phone calls from whistleblowers inquiring on the status of  their claim. The pilot sample included whistleblowers whose claims had  been open for at least 3 years and where the WO was not expecting to  take action in the short-term (i.e., 3 months or less). The letters did not  include any new information for the whistleblower, and state that the WO  cannot share further information about the claim. The letters simply stated  that the whistleblower’s claim remained open.
WO officials told us they will collect benefit and cost information about the  pilot for several months before deciding whether to continue it. However,  WO officials also told us they did not have a formal plan for assessing  these costs and benefits. A benefit-cost analysis is the OMB’s  recommended technique for a formal analysis of government projects,  and is used to aid agencies in determining whether a project is  appropriate when compared to alternative options, including the option of  not having the project. For such an analysis to be useful to decision  makers, it should include, among other elements, a comprehensive  enumeration of the different types of benefits and costs needed to identify  the full range of the project’s outcomes.
According to WO officials, the WO’s initial assessment of the program  shows that it has taken 100 staff hours to send pilot letters to  approximately 180 whistleblowers updating them on approximately 360  open claims. WO officials stated that a significant portion of the time  spent on the pilot program was spent confirming data in E-TRAK. WO  staff researched each whistleblower claim in the pilot to confirm the status  and the mailing address of the whistleblower. WO management stated  that this process improved the WO’s data by identifying claims that were  not properly updated in E-TRAK and by identifying incorrect addresses  through returned (undeliverable) mail. WO officials estimate that it would  take three staff years to send letters to all eligible whistleblowers, but WO  officials expect that the time needed for annual letters would decrease as  the office realizes labor efficiencies and improved E-TRAK data from  previous years’ letters.
The WO does not have plans to reach out to pilot letter recipients to  determine if they found value in receiving the letter or if they had other  feedback about the pilot program. The officials stated that sending a  survey (or otherwise reaching out to these whistleblowers) would be  counter to the intent of the program, which is to reduce the incoming calls  and correspondence. The WO plans instead to monitor the number of  phone calls and correspondence from pilot participants requesting  information about their claim to determine if the letters deterred  whistleblowers from contacting the WO. Further, WO officials said they  are monitoring press coverage and internet message board discussions  about the pilot letters. Internet postings indicate that whistleblowers are  frustrated by the lack of information in the letters. Most of the  whistleblower attorneys we spoke with—at least one of whose clients  were part of the pilot sample—generally did not think the pilot letters were  useful because they did not include a meaningful update on the status of  their claim. While some of the whistleblowers and attorneys we spoke  with said they appreciated IRS’s attempt to improve communication with  whistleblowers, the letters did not communicate anything new, and they  already knew their claims were open because they had not received  award or denial letters.
However, the sample of whistleblowers we spoke with (and those that  comment on the internet and in the press) may not be fully representative  of the whistleblower community’s views. Whistleblowers that wish to  remain anonymous may not express their opinions of the pilot program for  fear of being identified as a whistleblower. Without attempting to hear  directly from those receiving the letters, the WO is unable to fully identify  and measure the benefits of the program. Benefit information may be  skewed toward the opinions of vocal whistleblowers.
section_title: Multiple Opportunities Exist to Strengthen Whistleblower Protections
subsections: section_title: Potential and Observed Errors Include Sending Sensitive Information to Incorrect Addresses and Retaining Whistleblower Information in Exam Files
paragraphs: The protection of a whistleblower’s identity is of utmost importance to the  success of the program. Without such protections, some whistleblowers  may not come forward to IRS out of concern or fear for their employment  or safety, according to whistleblowers and their representatives that we  interviewed. As outlined in the IRM and in Treasury regulations, IRS will  protect the identity of the whistleblower to the fullest extent permitted by  the law. In instances where revealing a whistleblower’s identity is  essential to the pursuit of an examination or investigation, IRS guidance  states that it will make every effort to consult with the whistleblower  before deciding whether to proceed with the case. Also, IRS neither  confirms nor denies the existence of a whistleblower in a case if asked  directly by the taxpayer. While the WO has procedures and policies in  place to protect whistleblower identities, we found instances of  whistleblower identities being at risk for disclosure. In at least one case, a  whistleblower’s identity was improperly disclosed by a former IRS  employee who later pled guilty to several charges, including some related  to the handling of the audit pertaining to the whistleblower’s claim.
First, in our review of closed claim files we found that the WO has sent  sensitive whistleblower mail to incorrect addresses. The WO maintains  whistleblower addresses separately from taxpayer addresses in the event  that the whistleblower wishes to have WO mail sent to an address other  than the one used to file their tax returns. One whistleblower attorney said  he recommends having the WO send all of his clients’ mail to the  attorney’s office to minimize the risk of misdirected mail. Even so, we saw  instances in our file review of the WO sending mail directly to  whistleblowers even after receiving requests to send all mail to the  attorney. Further, on at least one of these mailings, the IRS Whistleblower  Office was named on the return address. Such errors could have  consequences for whistleblowers, including having their identity as a  whistleblower disclosed. In addition, whistleblowers’ rights could be  impacted because communication from the WO contains time-sensitive  material. For example, the whistleblower’s right to respond to the WO on  preliminary award recommendations or the right to appeal final award  determinations with the Tax Court must occur within 30 days from the  date the notice is sent by the WO.
WO officials told us that as of mid-2012, the office no longer identifies the  IRS Whistleblower Office on return mail labels, although there is no  written policy. WO officials recognized that whistleblowers were  uncomfortable with receiving mail that is clearly labeled as coming from  the IRS Whistleblower Office. According to these officials, mail sent from  the ICE unit in Ogden, UT (such as acknowledgement letters) lists only a  building identifier, and mail sent from other locations (such as a field  office where only one WO analyst works) is sent using the analyst’s  address and last name only. Given the volume of correspondence the  WO sends as well as the recent hiring of staff and plans for additional  hires, having a written policy would strengthen the WO’s protections of  whistleblowers’ identities.
The WO requests whistleblowers update their address with the WO  whenever they move, which can be a common occurrence given the  several years it can take for a claim to complete the review process.  Given that communications from the WO to whistleblowers are limited,  there are few opportunities to remind whistleblowers about this  requirement. Additionally, as of July 30, 2015, the WO’s website did not  include clear instructions for whistleblowers needing to change their  address. According to WO officials, it is possible that some  whistleblowers updated their address with IRS for their personal account  and erroneously thought the WO would also update E-TRAK with their  new address information. As a matter of protecting whistleblowers, the  WO does not default to using the whistleblower’s personal address. WO  officials told us they had not considered creating a change of address  form specific to whistleblowers. A change of address form specific to  whistleblowers could help alleviate some of the confusion whistleblowers  face when they change their addresses with IRS. However, according to  WO officials, such a form could create more administrative work for the  WO if it is mistakenly used by non-whistleblowers, such as if a taxpayer  wanting to update their personal account uses a whistleblower address  change form instead of the one intended for taxpayer files.
Even in instances when a whistleblower did submit the proper address  change request to the WO, E-TRAK was not always updated accordingly.  WO officials told us that updating address change information in E-TRAK  can be challenging and time consuming. For example, if a whistleblower  submits multiple, unrelated Forms 211 alleging noncompliance by  multiple taxpayers, the WO opens a claim for each in E-TRAK. If the  whistleblower moves or requests that all correspondence be sent to an  attorney, each of the whistleblower’s files in E-TRAK must be updated to  include the new address. WO officials said they were in the process of  developing an update for E-TRAK to allow for global updates to all files  for a particular whistleblower. As of July 28, 2015, an E-TRAK update has  been rolled out on a limited basis that allows for bulk updates of  addresses, among other things. According to WO officials, the new  function in E-TRAK is working well based upon initial testing with a  sample of bulk claims.
Second, we found instances where whistleblower information was not  returned to the WO after an exam was closed. According to the IRM and  other WO guidance, information identifying the name or existence of a  whistleblower should be protected, especially from the taxpayers the  whistleblowers include on their Form 211 submissions. When the WO  sends claims to the ODs for review and examination, the file contains a  cover sheet that instructs the OD how to handle whistleblower  information. For example, whistleblower information should receive  special security protections and the exam team should never disclose to  anyone the name of the whistleblower or the fact that IRS is in  possession of whistleblower information. All information provided by the  whistleblower is to be returned to the WO at the conclusion of any audit  activity with the Form 11369. Additional instructions are included on the  Form 11369 reminding the exam team of the proper procedures for  safeguarding whistleblower information and returning it to the WO.
Despite these procedures, we found instances where whistleblower  information (including the name and Social Security number of some  whistleblowers) was retained in exam files in breach of IRS policy. As we  reported in July 2015, three of the eleven TE/GE closed case files we  reviewed that originated from a whistleblower referral included information  identifying the whistleblower, such as by name or Social Security  number. Additionally, two others included information pointing to the  existence of a whistleblower, albeit not the identity. TE/GE officials said  that as of September 25, 2015, the five identified cases had been  redacted in accordance with the policy outlined in the IRM. WO officials  also cited other instances where they became aware of improper storage  or retention of whistleblower information and documentation in the ODs.  SB/SE officials said that as of September 1, 2015, they were in the  process of doing more training with staff on the issue. LB&I officials said  they send a memo to examiners that directs them to the LB&I website  where there is guidance and training on closing claims and protection of  whistleblower information. Because whistleblower cases have the  potential to be challenged through legal proceedings, these protections  are important. Without such file segregation, a taxpayer could potentially  identify a whistleblower in documents received during discovery for a  refund action or other tax-related suit in federal court.
These breaches in protecting whistleblowers’ identities highlight  weaknesses in IRS’s internal controls over whistleblower information and  records. As a part of internal control, management should limit records  access to authorized individuals and should assign and maintain  accountability for their custody and use. Current procedures call for the  examiners to retain separate taxpayer examination and whistleblower  claim files and to return the whistleblower claim file to the WO at the  conclusion of the examination to ensure proper handling of whistleblower  information. If reviews of these files are either not occurring or are not  effective, whistleblower information and the public’s trust in the program  are at risk. Additional controls—such as a specific management sign off  on files before they are closed in the OD—could reduce the risk of  whistleblower identities being inadvertently disclosed.
section_title: Tax Whistleblowers Do Not Have Legal Protections from Retaliation by Employers
paragraphs: Unlike other whistleblower programs, there is no law protecting tax  whistleblowers against retaliation from their employers. A tax  whistleblower that is discharged, demoted, suspended, threatened,  harassed, or otherwise retaliated against by their employer because they  provided information to the IRS has no cause of action to bring a lawsuit  in federal court. Other whistleblower award programs (such as those  created under the False Claims Act or Dodd-Frank Act) provide legal  recourse to such retaliatory practices. Under those statutes,  whistleblowers have a right to file a claim in U.S. district court for relief  from retaliatory actions, including reinstatement of their job, back pay, and  other damages.
Many of the tax whistleblower attorneys we spoke with also provide legal  services to individuals bringing suit under the False Claims Act. Those  attorneys commented that not having statutory relief from retaliation for  tax whistleblowers puts these clients at risk of adverse actions by their  employers if it becomes known that they are a whistleblower. Some tax  whistleblowers we spoke with also noted that they had suffered from  negative consequences at work—such as being denied a promotion or  being demoted—as a result of their whistleblower status. Some level of  legal protections may provide additional assurances to potential  whistleblowers and could encourage those with high-value inside  information about tax noncompliance to come forward.
It is the IRS and WO’s goal to protect the identity of the whistleblower.  IRS officials support statutory retaliation protections for tax  whistleblowers. IRS officials told us, however, that such protections  should be remediated outside of IRS. The Secretary of the Treasury has  put forth legislative proposals for retaliation protections for whistleblowers  in IRS’s fiscal years 2014, 2015, and 2016 Congressional Budget  Justifications, and has discussed them in recent WO annual reports to  Congress. In these proposals, Treasury estimates these protections  would not impose additional costs on IRS. As of August 31, 2015, no bills  providing protection to IRS whistleblowers from retaliation by their  employers had been introduced by the 114th Congress.
section_title: Conclusions
paragraphs: For the whistleblower program to be successful in helping IRS enforce the  tax code, encourage voluntary tax compliance, and reduce the tax gap by  collecting revenue that could have otherwise gone uncollected,  whistleblowers need to have confidence in the program’s processes and  outcomes. Since we last reported on the 7623(b) program in 2011, IRS  has made hundreds of millions of dollars in award payments to  whistleblowers and is in the process of evaluating thousands more claims  for potential award payments. The WO has also made several  improvements in the way it collects and reports information, making the  program more transparent. However, IRS and the WO could make  additional changes to improve timeliness, ensure the accuracy of award  payments, expand communications, and increase protections for  whistleblowers.
Identifying and addressing inefficient processes should be a priority for  the WO, especially in the wake of recent budget cuts and curbs to the  WO’s hiring plans. In order to maximize the benefits of information  provided by whistleblowers, the claim review process needs to efficiently  process useful information. Given the volume of claims received, even  small increases in efficiency can improve timeliness of claim reviews and  can free up WO resources to clear backlogs of other work, such as  issuing denial letters.
Whistleblowers need to have confidence that their awards have been  calculated fairly and correctly. While WO officials said they have instituted  a new policy to prevent the sort of errors we found in our review,  documenting the new policy and disseminating it to all staff in the WO is  essential to ensure everyone is aware of and has access to the policy.
Effective communication with Congress and the public is also critical to  the program’s success. The annual report to Congress serves as the  WO’s opportunity to provide a comprehensive overview of what the WO  accomplished and what challenges it faced in the prior fiscal year.  Presenting Congress with comprehensive, reliable, and clear data in a  timely manner will help Congress provide effective oversight. Further,  providing the public with a complete and accurate picture of how the WO  and the 7623 programs operate can bolster the public’s trust in the  program.
Finally, whistleblowers need assurances that their information and  identities are protected. Strengthening controls in areas such as mailings  and file retention can further prevent accidental disclosures of  whistleblower information that could bring them harm. Additional  protections against retaliation from employers could further boost  whistleblowers’ confidence in the program and encourage more insiders  with information on significant tax underpayments to come forward.
section_title: Matter for Congressional Consideration
paragraphs: To further encourage whistleblowers to provide information to IRS about  serious tax noncompliance and to protect whistleblowers, Congress  should consider legislation that would provide protections for tax  whistleblowers against retaliation from their employers.
section_title: Recommendations for Executive Action
paragraphs: We recommend the Commissioner of Internal Revenue direct the  Whistleblower Office Director to take the following eight actions:  1.  Implement a staffing plan for streamlining the intake and initial review  process to make more efficient use of staff resources.  2.  Record refund statute expiration dates (RSED) in E-TRAK and  monitor expiration dates routinely so that the award payment process  can start as soon as the claims are eligible for payment.  3.  Strengthen the procedures for calculating award amounts and for the  issuance of the preliminary award recommendations and award letters  to whistleblowers. Such procedures should include, at minimum, a  documented process for: supervisory review prior to the director’s concurrence, verifying collected proceeds prior to an award payment for both  the 7623(a) and 7623(b) programs, and   reviewing preliminary award recommendation and award letters to  the whistleblower prior to their issuance.  4.  Provide additional information in the annual report to Congress to  better explain the statistics provided and the categories of claim  review steps reported. Specifically, the report should  include correct, reliable data that reflect only the activities of the  fiscal year of the report; describe all status categories and clearly identify claim type in the  tables; and  include an overall timeliness measure (by providing an average  and range) to show how long claims take to go from submission of  Form 211 to closure decision.  5.  Develop an additional or revised fact sheet about the whistleblower  claim process and/or publish additional information on the IRS  website. Such information should include an outline of the entire claim review process, with an average time  or time range for the various review steps; a description of the key taxpayer rights that a taxpayer may  exercise and how much time this may add to a claim’s review; examples to illustrate common circumstances that result in  denials; and  items to include in a Form 211 submission, and suggestions for  the types of documentation that are particularly helpful to the WO.  6.  Develop a comprehensive plan for evaluating the costs and benefits  of the pilot annual status letter program, including obtaining feedback  from whistleblowers in the pilot regarding the usefulness of the letter.  7.  Establish a process to ensure whistleblower addresses are being  properly updated in E-TRAK to ensure the WO does not send  whistleblower mail to outdated or incorrect addresses. This process  could include developing a change of address form specific to  whistleblowers and including a blank copy of it in every  correspondence with whistleblowers or referencing the importance of  updating the WO with any address change in every correspondence  with whistleblowers.  8.  Formally document a procedure for return address labels for mail  originating from the WO that states that external envelopes should not  identify the WO as the sender of the correspondence.
We recommend the Commissioner of Internal Revenue direct the Deputy  Commissioner for Services and Enforcement to take the following two  actions:  1.  Develop guidance for examiners in operating divisions to use in  determining whether an Internal Revenue Code section 6103(n)  contract with a whistleblower would be beneficial and outline the steps  for requesting such a contract.  2.  Strengthen guidance and procedures to ensure whistleblower  information is retained only in the proper file locations. Such  procedures could include requiring management sign off of taxpayer  file reviews to ensure all whistleblower information has been  appropriately segregated and sent back to the WO.
To ensure timely and consistent information to Congress and the public,  we recommend the Secretary of the Treasury issue its Whistleblower  Office annual report to Congress no later than January 31st each year  covering the prior fiscal year.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided a draft of this report to the Commissioner of Internal  Revenue and Secretary of the Treasury for comment. IRS provided  technical comments that were incorporated, as appropriate. We received  written comments from IRS’s Deputy Commissioner for Services and  Enforcement, which are reprinted in appendix IV. Treasury did not provide  comments.
The Deputy Commissioner agreed with our recommendations and  underscored the importance of the whistleblower program as part of IRS’s  overall enforcement efforts and stated that IRS is committed to improving  the whistleblower claim review process and implementing the  recommendations in our report, as well as recommendations that are  expected as part of an internal Lean Six Sigma review. IRS has already  taken some actions to address the findings and recommendations in our  report. For example, the Deputy Commissioner said that the initial review  backlog of over 5,000 claims has been reduced to less than 500 as of  September 2015, and that ARC has brought on six new employees to  work on the award determination backlog. IRS is also addressing the  denials backlog and looking at ways to streamline the claim review  process to provide opportunities for efficiencies, including technology  improvements.
The Deputy Commissioner also acknowledged the constraints section  6103 disclosure rules place on the whistleblower program, but said IRS  will be looking for ways to address communication concerns, including  our recommendations related to the pilot annual status letter program and    6103(n) contracts. The Deputy Commissioner also stated that IRS will  address the recommendations for the annual report by implementing  meaningful changes to the content, format, and timing of the next annual  report. Finally, the Deputy Commissioner stated IRS recognizes the  importance of strong internal controls and of updating policies and  procedures in a timely manner to ensure proper oversight of the program.
As agreed with your offices, unless you publicly release its contents  earlier, we plan no further distribution of this report until 30 days from its  issue date. At that time, we will send copies to the Secretary of the  Treasury, the Commissioner of Internal Revenue, and other interested  parties. The report will also be available at no charge on the GAO website  at http://www.gao.gov.
If you or your staff have any questions about this report, please contact  me at (202) 512-9110 or at mctiguej@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. Key contributors to this report are listed in  appendix V.
section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: This report (1) describes the steps, timeframes, and staffing levels in the  whistleblower claims process, including the Whistleblower Office’s (WO)  staffing strategy for improving efficiency, and assesses how whistleblower  claims are prioritized within Internal Revenue Service’s (IRS)  investigation, examination, and collections workloads; (2) describes the  high-dollar 7623(b) whistleblower awards and assesses how the WO  determines these awards; (3) evaluates the WO’s role in managing the  whistleblower claims process and communicating with the whistleblower  community; and (4) evaluates how the WO safeguards whistleblower  identities and protects whistleblowers from retaliation.
To describe the steps and timeframes in the whistleblower claims  process, we reviewed IRS guidance, including IRS’s Internal Revenue  Manual (IRM), on whistleblower claims processing and IRS  management’s expectations for timeliness. To assess how often IRS met  its timeliness goals, we reviewed IRS data on how long IRS took to  process these steps. We also spoke with IRS officials in the WO and  operating divisions (ODs) responsible for completing these steps. We,  along with the Treasury Inspector General for Tax Administration  (TIGTA), identified several weaknesses with the whistleblower data  system, E-TRAK, but determined that the data we used were sufficiently  reliable for the purposes of our review. Sensitive to weaknesses in E- TRAK, the WO included procedures to validate the data they compiled for  us. The WO official said he checked whether data generated is consistent  with his knowledge of the program and examined outliers for potential  data entry errors. He also selected a sample of cases for individual file  reviews. We also looked at the claims processing documentation in the  whistleblower case files for 7623(b) awards to assess timeliness for those  claims. For WO staffing, we reviewed the WO’s staffing strategy and  proposals for additional staff. We also interviewed WO officials  concerning implementation of the WO’s staffing strategy in light of the  reduced fiscal year 2015 budget.
To assess how whistleblower claims are prioritized within IRS’s workload,  we reviewed IRS guidance, including the IRM, WO guidance to the ODs,  as well as OD guidance to their respective staff. We interviewed officials  from the four ODs that process whistleblower claims—Large Business  and International (LB&I), Small Business / Self-Employed (SB/SE), Tax  Exempt and Government Entities (TE/GE), and Criminal Investigation  (CI). We compared the procedures used in an investigation, examination,  or collections of cases with whistleblower claims to procedures used for  cases without whistleblower claims. We found that, generally, the same  procedures were used though whistleblower cases entail additional  processes to determine the merit of the whistleblower information, to  document contributions, and to ensure confidentiality.
To describe the 7623(b) awards, we reviewed the whistleblower case files  for all such high-dollar awards since the 7623(b) provision was  implemented in December 2006 through the end of June 2015. Of the 17  awards, we reviewed the 11 case files located in Ogden, Utah. For the  remaining 6 cases, we obtained copies of specific documents from the  WO, including Form 211 Application for Award for Original Information,  Form 11369 Confidential Evaluation Report on Claim for Award and other  documents submitted by the ODs, internal award recommendation report,  detailed award report, and any counsel memos. We also received awards  and collected proceeds data for 7623(a) claims from the WO. WO officials  reported they do not use E-TRAK to track collected proceeds and awards,  but rather use a separate spreadsheet which is also used for information  reporting of individual whistleblower income. The WO verified the  collected proceeds from taxpayer accounts.
To assess how the WO determines 7623(b) awards, we reviewed section  7623 of the Internal Revenue Code and implementing regulations, and  the IRM section which specifies the process and criteria for determining  whistleblower awards and interviewed WO officials. We also reviewed  the claim files of all awards paid under section 7623(b) to assess how the  WO determined awards, what criteria were used, whether the criteria  were applied consistently, and whether awards were correctly calculated.
To evaluate the role of the WO in monitoring whistleblower claims, we  reviewed the IRM and WO guidance, and interviewed WO and OD  officials responsible for whistleblower claims. We also looked at the  communication between the WO and ODs as documented in the 7623(b)  awards case files.
To evaluate how the WO communicates with the whistleblower  community, we reviewed relevant regulations covering confidentiality and  disclosure of information issues. We also reviewed IRS’s internal and  external communications plan, including WO’s two fact sheets for external  communication, and interviewed WO staff involved with implementing the  strategy. We also interviewed a non-generalizable sample of five  whistleblowers and nine whistleblower attorneys for their perspectives on  IRS communication with whistleblowers. We selected these whistleblower  attorneys based on their participation in our prior report, their varied  experiences with the WO, and on recommendations of others within the  whistleblower community. We also spoke with whistleblowers who  contacted us either on their own or through their attorney. Due to  confidentiality concerns, we did not reach out directly to any  whistleblowers. We used qualitative data analysis software to identify  common themes and patterns in our interviews with whistleblowers and  their attorneys.
To evaluate how the WO safeguards whistleblower’s identities and  protects whistleblowers from retaliation, we reviewed IRS guidance,  including the IRM, on what steps the WO and ODs take to keep  whistleblower identities confidential. We interviewed WO and OD  officials about key controls for safeguarding information and the potential  weaknesses of such controls. We reviewed Department of the Treasury’s  legislative proposals on retaliation protections for tax whistleblowers.  We also interviewed whistleblowers and whistleblower attorneys to  discuss the usefulness and potential benefits of employer retaliation  protections.
We conducted this performance audit from October 2014 to October 2015  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.
section_title: Appendix II: Whistleblower Claim Closures by Decision Maker
paragraphs: Whistleblower claims can be denied and closed throughout the claim  review process. Table 5 summarizes where claims closure decisions  occurred from fiscal year 2013 through August 5, 2015. Most claims that  are closed are done so at the WO initial review stage.
section_title: Appendix III: Status of the 12,439 Open 7623(b) Claims as of August 5, 2015
subsections: section_title: Current status Whistleblower Office (WO) - initial review Operating division (OD) subject matter expert Large Business and International (LB&I)
paragraphs: Small Business / Self-Employed (SB/SE)
TEFRA related claims are those that involve partnerships as defined in the Tax Equity and Fiscal  Responsibility Act of 1982 (TEFRA).  PARL stands for the preliminary award recommendation letter.
section_title: Appendix IV: Comments from the Internal Revenue Service
section_title: Appendix V: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, Libby Mixon (Assistant Director),  Lisette Baylor, Amy Bowser, Brett Caloia, Bertha Dong, Mackenzie Doss,  Robert Gebhart, Danielle N. Novak, Cynthia Saunders, Albert Sim, and  James R. White made key contributions to this report.