Please ensure Javascript is enabled for purposes of website accessibility

The IRS Will Pay You for Snitching but You Better Have a Big Fish and Don’t Mind Waiting

IRS_logo-thumb-150x140.jpgRecently we discussed snitching on tax cheats in the UK and we speculated that tax rats Stateside would be less common because of the increasing trend of hating (or just plain killing) on the Federal Government.
Well, we were dead wrong. Since Congress passed the Tax Relief and Health Care Act of 2006, the payouts to whistleblowers increased from a maximum of 15% of the recovered proceeds to a maximum of 30%. So far the temptation is working as tips to the IRS have increased to 476 for the latest fiscal year (9/30) compared to just 116 in the previous year.
Continued, after the jump

The catch is that the IRS doesn’t want to hear about your elderly neighbor that’s running numbers out of their basement for extra cash. No, they want the serious scofflaws, according to the Tax Girl, “the tax, penalties, interest, additions to tax, and additional amounts in dispute must exceed $2 million for any taxable year (that’s the sother restrictions also apply).”
So if you crunch the numbers, you can see there’s plenty of motivation to flip on someone if you know they are a tax dodger. Problem so far is that because of the boring arcane nature of tax law and the swiftness of the American court system, not one payout has occurred to date.
Plus, the law isn’t exactly encouraging the most honest of folks to come forward when you consider that Joe Francis’s accountant ratted him out only to be accused of shenanigans himself. And as Joe Kristan points out, “…there is always something creepy about the IRS being able to horn in on confidential client-professional relationships…”
The IRS probably isn’t worried too much about who gives them the information, just as long as they get it, so they’ll probably make a run at this with an imperfect system and with sources of questionable motivation for the time being.
If You Pay Them, They Will Come [Tax Girl]
Informant Program Spurs IRS Whistleblower Tips [Web CPA]
30 Pieces of Silver or 30 Percent of the Gross [Roth & Company, Tax Update Blog]

Posted in Tax