In anticipation of National Whistleblower Appreciation Day on July 30, the Internal Revenue Service Whistleblower Office today recognized the important role whistleblowers play in supporting the nation’s tax administration.

Since issuing its first award in 2007 through June 2024, the IRS has paid over $1.2 billion in awards based on the successful collection of $7 billion from non-compliant taxpayers.

“The IRS appreciates the valuable contributions that thousands of whistleblowers have made to help bolster the fair and effective enforcement of our nation’s tax laws,” said IRS Whistleblower Office Director John Hinman. “Information from whistleblowers continues to be an incredibly effective aid to IRS compliance efforts, and we are committed to improving our whistleblower program by increasing our capacity to use high-value whistleblower information effectively, awarding whistleblowers fairly and as soon as possible, and keeping whistleblowers informed of their claim’s status and the basis for IRS decisions on claims.”

The IRS Whistleblower Office is strengthening collaboration with all whistleblower program stakeholders. The office also recently updated Form 211, Application for Award for Original Information PDF, and is currently working on a digital submission portal for whistleblower claims, which it plans to have online in 2025.

In Fiscal Year 2023, the IRS paid awards totaling $88.8 million based on whistleblower information attributable to tax and other amounts collected of $338 million. In Fiscal Year 2023, the Whistleblower Office established 16,932 award claims, an increase of 44% compared to the average of the prior four years.

The IRS values the assistance it’s received from whistleblowers and the whistleblower practitioner community. Whistleblower information that the IRS can act on is an important component of effective tax administration and contributes to identifying non-compliance and reducing the tax gap.

Actionable claims contain specific, timely and credible information. A whistleblower may qualify for an award when use of the whistleblower’s information results in proceeds collected. The awards paid to whistleblowers generally range between 15 and 30% of the proceeds collected and attributable to their information.

The IRS Whistleblower Office was established in 2007 to administer claims from whistleblowers that identify taxpayers who may not be complying with tax laws or other laws the IRS administers, enforces or investigates.

National Whistleblower Appreciation Day is recognized on July 30 because America’s first whistleblower law was passed by the Continental Congress on July 30, 1778. The first law related to whistleblowers on tax violations was enacted almost 90 years later in March 1867.

Source: IRS-2024-199, July 29, 2024

Week 3 of Protect Your Clients; Protect Yourself series focuses on security warning signs

In the third part of a special series, the Internal Revenue Service and the Security Summit partners today urged tax professionals to learn the signs of data theft so they can respond quickly to protect their business and their clients.

The IRS and the Security Summit partners continue to see a relentless string of attempts by identity thieves to target tax professionals in hopes of gaining valuable client tax information. With stronger fraud defenses put in place by the IRS and Security Summit partners, identity thieves have shifted their attention to tax pros to get more detailed information to help prepare bogus tax returns.

“We continue to see instances where tax professionals have had their systems compromised, and they didn’t realize it for week or months,” IRS Commissioner Danny Werfel said. “Identity thieves are creative, and they can find ways of quietly penetrating systems. There are important warning signs tax pros should watch out for that can help alert them more quickly to a security issue, and speed is critical to protect clients and their businesses from a security incident.”

The IRS, state tax agencies and the nation’s tax industry – working together as the Security Summit – reminded tax professionals that they should contact the IRS immediately when there’s an identity theft issue while also contacting cybersecurity experts and insurance companies to assist them with determining the cause and extent of the loss.

This is the third week of an eight-part Protect Your Clients; Protect Yourself summer series, part of an annual education effort by the Security Summit, a group that includes tax professionals, industry partners, state tax agencies and the IRS. The public-private partnership has worked since 2015 to protect the tax system against tax-related identity theft and fraud.

These security tips will be a key focus of the Nationwide Tax Forum, being held this summer in five cities throughout the U.S. In addition to the series of eight news releases, the tax professional security component will be featured at the forums, which are three-day continuing education events. The next forum begins next week in Orlando, Florida, and is already sold out, followed by the week of August 13 in Baltimore, August 20 in Dallas and September 10 in San Diego. The IRS reminds tax pros that registration deadlines are quickly approaching for the Baltimore and Dallas forums, as San Diego has also sold out.

Each year at the tax forums, the IRS hears from tax professionals attending the sessions who realize that they’re victims of a data theft or a security breach, but they hadn’t realized the warnings signs. Here are some things that can help.

Tax pros: Know the warning signs from clients, their systems

Tax pros should be on the lookout for these critical warning signs from their clients:

• Clients receive notice that an IRS Online Account was created without their consent or that:
  • Someone accessed their IRS Online Account without their knowledge.
  • The IRS disabled their Online Account, either their individual or business Online Account.
• Tax pro clients receive a tax transcript they didn’t request.
• Balance due or other notices from the IRS are received that are not correct based on the tax return filed.
• Clients reach out to the tax pro about calls or emails the tax pro didn’t make.
• Clients receive refunds without filing a tax return.

Tax professionals should also watch for these red flags when their business experiences these situations:

• Slow or unexpected computer or network responsiveness such as:
  • Software is slow or actions take longer to process than usual.
  • Computer cursor moves or changes numbers without touching the mouse or keyboard.
  • Unexpectedly being locked out of a network or computer.
• Client tax returns are being rejected because their Social Security number was already used on another return.
• IRS authentication letters (5071C, 6331C, 4883C, 5747C) are being received even though a tax return hasn’t been filed.
• Getting more e-file receipt acknowledgements than the tax pro actually filed.
• The IRS disabled the tax professional’s online account.
• Transcripts are being delivered to the tax pro’s Secure Object Repository (SOR) that they did not order.
• Notification from the IRS that the tax professional’s Centralized Authorized File (CAF) number has been compromised. If they suffer a data compromise, they should take proactive steps to protect their CAF number and consider requesting a new one to protect themself and their clients.
• Notification from the IRS regarding a client that they do not represent.

While these are only a few examples, tax pros should ensure they have the highest security possible and be ready to react quickly to protect themselves and their clients. To help tax pros, the Summit partners created the Written Information Security Plan PDF or WISP. The newly updated 29-page, easy-to-understand document was developed by and for tax and industry professionals to help keep client and business information safe and secure.

Tax pros should report data theft immediately

If a tax pro or their firm are the victim of data theft, they should:

• Report the incident to their local IRS stakeholder liaison. Speed is critical. IRS stakeholder liaisons will ensure all the appropriate IRS offices are alerted. If reported quickly, the IRS can take steps to block fraudulent returns in the clients’ names and will assist tax pros through the process.
• Visit the Federation of Tax Administrators to find state contact information. Tax professionals can share information with the appropriate state tax agency by visiting the special Report a Data Breach.
• Tax professionals should be proactive with clients who could have been impacted and suggest appropriate actions, such as obtaining an identity protection PIN or completing a Form 14039, Identity Theft Affidavit PDF, if applicable.

Find more information at Data theft information for tax professionals.

Additional resources

• Publication 5293, Data Security Resource Guide for Tax Professionals PDF, provides an overview and resources about how to avoid data theft.
• Tax professionals can also get help with security recommendations by reviewing IRS Publication 4557, Safeguarding Taxpayer Data PDF, and the IRS’ Identity theft information page for tax pros.
• Small Business Information Security: The Fundamentals PDF, by the National Institute of Standards and Technology.

Tax professionals should stay connected to the IRS through subscriptions to e-News for tax professionals and its social media sites.

Source: IRS-2024-193, July 23, 2024

As part of continuing compliance efforts under the Inflation Reduction Act, the Internal Revenue Service today announced the agency has surpassed the $1 billion mark in collections from high-wealth taxpayers with past-due taxes.

As part of larger efforts taking place, the IRS has stepped up activity specifically on 1,600 individuals whose incomes were more than $1 million per year and who each owed the IRS more than $250,000 in recognized tax debt. Since last fall, this IRS compliance effort has generated more than $1 billion in collections from this group, with work continuing in this area.

“With this collection activity, the IRS passed an important milestone in our effort to improve compliance and ensure fairness in the tax system,” said IRS Commissioner Danny Werfel. “Our increased work in this area means these past-due tax bills from high-end taxpayers are no longer being left on the table, like they were too often in the past.”

“Years of funding declines meant the IRS couldn’t get to money that we knew was owed, but we simply didn’t have the resources or staffing to collect,” Werfel added. “Funding from the Inflation Reduction Act is reversing a decade-long decline in our compliance work, including increasing our compliance work involving the wealthiest individuals and groups with tax issues. The collection results achieved in less than a year reveal the magnitude of what can be achieved over the long run as our Inflation Reduction enforcement continues to ramp up in the months ahead.”

Werfel noted that Inflation Reduction Act resources continue to help in a variety of areas. In addition to improving taxpayer service during the successful 2024 filing season, the IRS has focused IRA resources on expanded enforcement work to pursue complex partnerships, large corporations and high-income, high-wealth individuals who do not pay overdue tax bills.

“We continue working to add staff and technology to ensure that the taxpayers with the highest income, including partnerships, large corporations and millionaires and billionaires, pay what is legally owed under federal law,” Werfel said. “At the same time, we are focused on improving our taxpayer service for hard-working taxpayers. The additional resources the IRS received under the Inflation Reduction Act are making a difference, both for taxpayers who play by the rules and those who don’t.”

Prior to the Inflation Reduction Act, more than a decade of budget cuts prevented the IRS from keeping pace with the increasingly complicated maneuvers that the wealthiest taxpayers use to hide their income and evade paying their share. The IRS is continuing to take action to close this gap.

Today’s announcement involves a segment of high-income individual taxpayer cases. Last fall, the IRS ramped up efforts to pursue high-income, high-wealth individuals who failed to pay a tax bill. These high-end collection cases are concentrated among taxpayers with more than $1 million in income and more than $250,000 in recognized tax debt.

Out of a total of 1,600 of these cases, the IRS has assigned 1,500 to revenue officers, with over $1 billion collected so far. The $1 billion collected through spring represents payments from over 1,200 individuals, with the IRS anticipating the figure to grow in the months ahead.

IRS continues work on high-wealth non-filers, complex partnerships, large corporations

The IRS has a variety of other efforts underway to improve tax compliance in overlooked areas where the agency did not have adequate resources prior to Inflation Reduction Act funding.

Earlier this year, the IRS announced a new effort focused on high-income taxpayers who have failed to file federal income tax returns in more than 125,000 instances since 2017. Non-filers receive IRS compliance letters alerting them that the IRS is aware of their missing return and encouraging them to file or contact the IRS. The new initiative involves more than 25,000 people with more than $1 million in income, and over 100,000 people with incomes between $400,000 and $1 million between tax years 2017 and 2021.

These are all cases where the IRS has received third party information—such as through Forms W-2 and 1099s—indicating these people received income in these ranges but failed to file a tax return. Without adequate resources, the IRS non-filer program has only run sporadically since 2016 due to severe budget and staff limitations that didn’t allow these cases to be worked. With new Inflation Reduction Act funding available, the IRS now has the capacity to do this core tax administration work.

The IRS anticipates having more details related to this non-filer initiative later this year.

Other elements of the agency’s renewed compliance focus include:

• Abusive use of partnerships. Last month, the IRS announced a new series of steps to combat abusive partnership transactions that allow wealthy taxpayers to avoid paying what they owe.
• Activities involving large corporations and partnerships. These efforts include opening examinations of 76 of the largest partnerships in the U.S., representing a cross section of industries including hedge funds, real estate investment partnerships, publicly traded partnerships, large law firms and other industries. Other activities include expanding the large corporate compliance (LCC) program.
• Aircraft use. In February, the IRS announced plans to begin dozens of audits involving personal use of business aircraft. The audits will focus on aircraft usage by large corporations, large partnerships and high-income taxpayers. The IRS will examine whether the use of jets is being properly allocated between business and personal use.

Source: IRS-2024-185, July 11, 2024