Turn in a Tax Cheat

As part of the recent initiative to collect more of the taxes that the government is owed, the IRS has revamped an existing program to prevent businesses and individuals from evading taxes or receiving fraudulent refunds.  The IRS Whistleblower Office oversees the “turn in a tax cheat” program, which has recently been amended to allow for rewards in a wider variety of situations.  Previously, if a whistleblower’s tips resulted in a business or individual paying additional taxes, he or she could receive a reward; however, under the new rules, whistleblowers may also receive rewards if businesses or individuals are found to be receiving more in tax refunds or tax credits than they actually qualify for.

Under Section 7623(b) of the IRS Code, a whistleblower is guaranteed a reward of 15-30% of the additional taxes paid by the tax evader, but only if the amount in question is at least $2 million.  Additionally, if the tax evader is an individual, he or she must have a gross income of least $200,000.  For turning in tax evaders with incomes much lower than these thresholds, Section 7623(a) still allows for a reward, although it is not mandatory and is capped at 15% of the amount recovered.

The information page for the Whistleblower Informant Award (http://www.irs.gov/compliance/article/0,,id=180171,00.html) emphasizes that the IRS only rewards “people who provide specific and credible information. . .[that] results in the collection of taxes, penalties, interest or other amounts. . . . The IRS is looking for solid information, not an ‘educated guess’ or unsupported speculation.”  Also, it is important to be aware that a reward will not be paid until a case is completely resolved, including all appeals.

Using IRS Form 211 (http://www.irs.gov/pub/irs-pdf/f211.pdf), you can submit information about a potential tax evader, whether his or her income is above or below the $200,000 threshold.  In most cases, you can remain anonymous, unless you are called upon to provide testimony for the case.

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