President Joe Biden’s nominee for IRS commissioner vowed he would make it “a top priority” to assess the agency’s troubled process for investigating tips against the nation’s wealthiest tax cheats.
“It is critical that the IRS’s Whistleblower Program be treated with the highest priority,” the nominee, Danny Werfel, said in written answers to members of the Senate Finance Committee. The committee approved his nomination last week, and it will now head to a vote before the full Senate.
Werfel’s remarks cheered critics of the IRS and its notorious struggles to catch rich individuals and corporations who dodge their taxes.
Every year, the United States loses an estimated $1 trillion to unpaid taxes. The IRS whistleblower program was intended to be a powerful tool against wealthy tax cheats but is instead plagued by delays, infighting and a lack of investigative resources.
Congress set up the whistleblower office to incentivize those with knowledge of corporate and wealthy tax dodgers to tip off the IRS. In exchange, whistleblowers can get a cut of whatever the IRS collects, provided they didn’t plan or initiate the tax evasion scheme to begin with.
But critics, including members of Congress, describe the program as broken. In a HuffPost report in September, whistleblowers and their lawyers described waiting more than a decade for the agency to look into tips that could lead to the recovery of tens of millions or even billions of dollars in unpaid taxes.
One longtime whistleblower attorney described the program as “one of the greatest wastes of government opportunity that’s out there.”
Werfel promised to scrutinize the long delays plaguing the office and to measure its success against other federal whistleblower programs, although he stopped short of promising concrete improvements.
Among other challenges, deep cuts to the IRS workforce have made it difficult for the agency to assess complex tax schemes and contend with taxpayers’ high-powered attorneys. From 2018 to 2021, the amount of money the office recovered plunged from $1.4 billion to $245 million, according to annual reports.
John Hinman, who became director of the whistleblower office in May 2022, has promised to make improvements and fight for a share of the Inflation Reduction Act provision that sets aside $78 million to backfill critical IRS positions.
Critics of the office now hope Hinman will have a supporter in Werfel, who served as acting IRS commissioner under President Barack Obama before joining the Boston Consulting Group. Biden nominated Werfel in November to replace outgoing IRS commissioner Charles Rettig.
The same day the Senate Finance Committee approved Werfel’s nomination, a bipartisan group of four senators reintroduced a bill to improve the IRS whistleblower office. The bill, sponsored by Sens. Chuck Grassley (R-Iowa), Ron Wyden (D-Ore.), Roger Wicker (R-Ala.) and Ben Cardin (D-Md.), would penalize the IRS for long delays in issuing awards and change the legal standard in cases where whistleblowers sue the agency to be more favorable to whistleblowers.
But the legislation does not include a proposal to increase the office’s funding, which was part of a similar bill Grassley and Wyden proposed in 2021.