IRS FORM 211
IRS FORM 11369
IRS Form 211 is the form by which a person makes application for award for original information, under the IRS Whistleblower provisions found in I.R.C. § 7623.
IRS Form 11369 is the form which allows an IRS operating division to inform the IRS Whistleblower office of each issue raised by the whistleblower, the disposition of that issue (i.e., whether the issue was pursued), and the level of assistance the whistleblower provided.
TAX COURT HOLDS THAT IRS WHISLEBLOWERS ARE ELIGIBLE FOR AN AWARD EVEN IF THE WHISTLEBLOWER HAS GONE FIRST TO SOMEONE IN THE IRS OTHER THAN THE IRS WHISTLEBLOWER OFFICE
---Whistleblower 21276-13W v. IRS, 2015 U.S. Tax Ct. LEXIS 23 (6/2/15)
When deciding on whether or not to become a whistleblower, and provide the IRS information about Federal tax violations, a person will want to first understand the scope of the Federal whistleblower provisions as it relates specifically to rewards that can be granted. In a recent case, Whistleblower 21276-13W v. IRS, 2015 U.S. Tax Ct. LEXIS 23, 144 T.C. No. 15 (June 2, 2015), the Tax Court took on whether whistleblowers were required as a matter of law to file Forms 211 with the IRS Whistleblower Office before providing information to the IRS in order to qualify for an award under I.R.C. § 7623(b). The Tax Court held that they were not.In reaching this holding, the Tax Court had this to say about the Whistleblower Statute:
Whistleblower Statute Backgound
“Before its amendment in 2006, section 7623 authorized the Secretary to pay "such sums as he deems necessary for--(1) detecting underpayments of tax, and (2) detecting and bringing to trial and punishment persons guilty of violating the internal revenue laws or conniving at the same". The regulations promulgated thereunder provided that IRS district and/or service center directors have authority to approve awards "in a suitable amount, for information that leads to the detection of underpayments of tax, or the detection and bringing to trial and punishment of persons guilty of violating the internal revenue laws or conniving at the same." Sec. 301.7623-1(a), Proced. & Admin. Regs. The regulations further provided that the "amount of a reward will represent what the district or service center director deems to be adequate compensation in the particular case." Id. para. (c); see Michelle M. Kwon, "Whistling Dixie About the IRS Whistleblower Program Thanks to the IRC Confidentiality Restrictions", 29 Va. Tax Rev. 447, 452 (2010).
In 2006 the Treasury Inspector General for Tax Administration (TIGTA) reviewed the whistleblower award program and filed a report entitled "Treasury Inspector General for Tax Administration Report 2006-30-092, The Informants' Reward Program Needs More Centralized Management Oversight (June 2006)" (TIGTA Report). The TIGTA Report found that the whistleblower award program had significantly contributed to the IRS' enforcement efforts and that examinations based on informant information were often more effective and efficient than examinations initiated using the IRS' primary method for selecting returns for examination. TIGTA Report at 1-2. However, the TIGTA Report found that the whistleblower award program was weakened by lack of standardized procedures and managerial oversight. Specifically, the TIGTA Report stated there was no national database of informant claims (instead there were five regional databases, one for each of the five regional units), and 45% of the case files reviewed suffered basic control failures, such as missing copies of forms and missing records of letters sent to informants. The TIGTA Report further stated that TIGTA was unable to determine (1) the justification for the percentage amount awarded to the informants in 32% of the cases reviewed and (2) the rationale for the decision to reject the informant's claim in 76% of the cases reviewed.
The TIGTA Report found that the whistleblower award program was replete with lengthy delays, averaging 7-1/2 years for an award to be paid to an informant. Id. at 2. The TIGTA Report concluded that while part of this delay was a result of the statute's requirement that rewards be paid only after the additional taxes, fines, and penalties had been collected, the IRS failed to monitor taxpayers' accounts for payment activity for periods longer than a year. The TIGTA Report further concluded that award rejections took an inordinate amount of time, and TIGTA could not determine the reason for delays between the receipt of the whistleblower's claim and review thereof. Id. at 8-9.
The TIGTA Report made two primary recommendations: first, that the IRS centralize management of the whistleblower award program and standardize processing of award claims; and second, that a detailed nationwide database of informant claims be developed and implemented. Id. at 9.
C. The 2006 Amendment and Section 7623(b)
In 2006 Congress enacted TRHCA to strengthen the IRS whistleblower award program. TRHCA sec. 406(b), an uncodified provision, established the IRS Whistleblower Office to administer the whistleblower award program. TRHCA sec. 406(b) provides:
(1) In general.--Not later than the date which is 12 months after the date of the enactment of this Act, the Secretary of the Treasury shall issue guidance for the operation of a whistleblower program to be administered in the Internal Revenue Service by an office to be known as the "Whistleblower Office" which--
(A) shall at all times operate at the direction of the Commissioner of Internal Revenue and coordinate and consult with other divisions in the Internal Revenue Service as directed by the Commissioner of Internal Revenue,
(B) shall analyze information received from any individual described in section 7623(b) of the Internal Revenue Code of 1986 and either investigate the matter itself or assign it to the appropriate Internal Revenue Service office, and
(C) in its sole discretion, may ask for additional assistance from such individual or any legal representative of such individual.
(2) Request for assistance.--The guidance issued under paragraph (1) shall specify that any assistance requested under paragraph (1)(C) shall be under the direction and control of the Whistleblower Office or the office assigned to investigate the matter under paragraph (1)(A). No individual or legal representative whose assistance is so requested may by reason of such request represent himself or herself as an employee of the Federal Government.
Respondent argues the statutory provisions make clear that Congress intended the Whistleblower Office to serve as the gatekeeper of whistleblower information. According to respondent, the Whistleblower Office is able to maintain the discretion granted it by TRHCA sec. 406(b)(1)(B) to investigate the matter or assign it to an appropriate IRS office only if the whistleblower information is first provided to it. Similarly, respondent maintains that the discretion granted to the Whistleblower Office by TRHCA sec. 406(b)(1)(C) to ask for assistance from the whistleblower would be jeopardized if it did not first receive the information. Respondent posits that this interpretation is consistent with the conclusions of the TIGTA Report emphasizing the need for centralized management of the whistleblower award program.
Respondent's position does not survive close scrutiny. As the TIGTA Report noted, audits under the old whistleblower award program were effective; it was the process by which awards were issued that was problematic. TRHCA sec. 406 addresses this problem. It is clear from the statute that the Whistleblower Office is charged with being the central office for investigating the legitimacy of a whistleblower's award claim, not necessarily the underlying tax issue. To interpret TRHCA sec. 406(b)(1)(B) as respondent does would mean the Whistleblower Office is authorized to open an examination relating to a taxpayer. But the Whistleblower Office has neither sufficient staff nor institutional expertise to investigate taxpayers. See Internal Revenue Manual pt. 18.104.22.168 and 22.214.171.124 (June 8, 2010) (discussing the roles and mission of the Whistleblower Office). And were the Whistleblower Office to expand its staff and expertise sufficiently to conduct examinations relating to taxpayers brought to its attention by whistleblowers, such expansion would duplicate the resources already available in IRS operating divisions.
Moreover, if the Whistleblower Office opened an examination relating to a taxpayer, such an examination would alert the taxpayer that an informant was involved and this would potentially subject the whistleblower to exposure and retaliation, directly contravening the IRS policy of protecting the identities of informants. And we are loath to interpret a statute in a manner that leads to an absurd result. See, e.g., United States v. Granderson, 511 U.S. 39, 47 n.5, 114 S. Ct. 1259, 127 L. Ed. 2d 611 (1994); In re Chapman, 166 U.S. 661, 667, 17 S. Ct. 677, 41 L. Ed. 1154 (1897).
IRS auditors do not shy away from directly contacting whistleblowers when in need of assistance. See, e.g., Whistleblower 10949-13W v. Commissioner, T.C. Memo. 2014-106, at *3. Tellingly, at the partial trial of these cases, the IRS agent testified that he would not suspend his investigation to permit whistleblowers to file forms with the Whistleblower Office.
Despite respondent's assertions, we are mindful that the Forms 211 which petitioners filed anticipate that a whistleblower may approach an operating division of the IRS before notifying the Whistleblower Office. See Form 211, Line 8, which instructs the whistleblower to provide the "Name & Title of IRS employee to whom violation was reported", and line 9 which asks for the "Date violation reported".
Form 211 was revised in March 2014. It was not, and never has been, altered to discourage whistleblowers from approaching an operating division of the IRS. To the contrary, revised Form 211 expands the detail about a whistleblower's directly contacting investigating agencies before contacting the Whistleblower Office, including providing space for the whistleblower to report any information submitted to other Federal agencies as well as State authorities. See Form 211, Line 5, which instructs the whistleblower to provide the "[n]ame and title and contact information of IRS employee to whom violation was first reported, if known". See also line 6, which instructs the whistleblower to provide "[d]ate violation reported (in number 5), if applicable". And line 7 asks: "Did you submit this information to other Federal or State Agencies"? And Line 8, which states: "If yes in number 7, list the Agency Name and date submitted". If respondent's position were correct, these lines would be superfluous; in fact, they would be misleading to an unwary whistleblower.
Respondent also argues that the Whistleblower Office must first receive a whistleblower's information in order to permit Form 11369 to be filled out. Respondent maintains:The Form 11369 is the key document used by the Whistleblower Office in making the determinations required by section 7623 and only is created on a contemporaneous basis when information is referred by the Whistleblower Office. Thus, allowing individuals to file an award claim based on information previously submitted to a different function of the IRS would circumvent the centralized oversight and management of the program that was mandated by congress when section 7623(b) was enacted and undermine the Whistleblower Office's ability to make well-supported determinations.
In considering respondent's argument, we have reviewed Form 11369. The form allows an IRS operating division to inform the Whistleblower Office of each issue raised by the whistleblower, the disposition of that issue (i.e., whether the issue was pursued), and the level of assistance the whistleblower provided. Upon examination of the form, we do not believe it must be completed contemporaneously with a taxpayer-related examination. There is no reason for the contact information provided by Form 211 lines 5 and 6, other than for it to be used by the Whistleblower Office to contact the IRS employee who received the whistleblower information. And there is no reason for the Whistleblower Office to contact the IRS employee except when evaluating the whistleblower's claim.
Finally, even if respondent's contention that the Whistleblower Office is authorized by TRHCA sec. 406 to conduct examinations relating to taxpayers is correct, the statute does not mandate that a whistleblower first bring his/her information to the Whistleblower Office to be eligible for an award. TRHCA sec. 406(b)(1)(B) provides only that the Whistleblower Office shall "analyze information received" and "either investigate the matter itself or assign it to the appropriate Internal Revenue Service office." The statute makes no mention of the Whistleblower Office's being the first IRS office to receive information, and, as a practical matter, nothing prevents the Whistleblower Office from pursuing the whistleblower's information even after another IRS office receives it.”
2015 U.S. Tax Ct. LEXIS 23 at *19-28.
In the Whistleblowers practice area at the Tufts Law Firm, we consult with persons who have an interest in pursuing whistleblowing with the IRS, using IRS Form 211, and wanting to know if they might be eligible for an award. For over two decades, Mr. Tufts has worked in this area and represented whistleblowers. If you wish to engage us specific to whistleblowing and the use of IRS Form 211 or have questions about an IRS Form 11369, please contact us.