IRS Whistleblower Rules For Disclosure of Tax Return Information to Whistleblowers and Their Attorneys

The IRS announced today final regulations for sharing of tax return information with IRS whistleblowers and their lawyers, as the IRS pursues tax whistleblower claims.

Under these regulations, officers and employees of the Treasury Department may disclose tax return information to whistleblowers and, if applicable, their legal representatives, in connection with written contracts for services. (See our updated comments on why this rule and IRS practice should change dramatically, as the procedure has never been used.)

In theory, that sharing of information should follow the highly successful model used by the Justice Department in leveraging its resources by using the knowledge and expertise of whistleblowers in pursuing whistleblower cases under the False Claims Act. When information is shared, the whistleblowers and their lawyers have often helped maximize the government’s recovery.

In practice, however, this IRS rule is misguided and should be overhauled.

The regulation memorializes the position that sharing of return information will be “infrequent.” In practice, however, “infrequent” seems to have meant rarely, if ever. In fact, Tax Notes has confirmed that–four years into the new IRS Whistleblower Program–the IRS has not yet approved use of this procedure in any claim.

Senator Grassley, I hope you are listening. It seems the powers that be at the IRS (not the Whistleblower Office) do not wish to take advantage of the knowledge and expertise of whistleblowers and their lawyers.

The public will suffer as a result, as honest taxpayers continue to pick up the tab for tax cheats.

The full text is linked here.