While there are plenty of ways for people to earn extra cash, how many would really take the opportunity to rat out an acquaintance to earn some extra dough? Not everyone may realize that you can make a small profit by reporting persons to the IRS for not paying taxes they owe but there is an actual program sponsored by the IRS that allows exactly that.
What is the Whistleblower-Informant Award?
A person who provides information on those who have failed to pay a tax they owe can earn up to 30% of the additional tax and penalties the government collects. The information provided about the tax offender must be credible and specific and the IRS must be able to use it to collect on the tax amount plus interest and penalties. Credible information can not be speculation or a guess. The IRS is actively seeking the information on significant tax amounts. The program does not support the resolution of personal tax issues or conflicts involving business relationships.
How Can I Get the Award?
There are two kinds of awards offered by the IRS. In the first program, if the tax with interest and penalties exceeds $2 million with all other qualifications being met, the IRS will pay 15-30% of the total amount collected. If a whistleblower reports an individual, the gross annual income of the offending individual must be more than $200,000. In the event a whistleblower is in disagreement about the outcome of their claim, they can dispute it in tax court.
There is also another award program for amounts less than those stated above. Awards in smaller cases will be less and the maximum award amount a whistleblower can get is 15% of $10 million. These types of cases can not be disputed in tax court if the individual is not happy with the outcome.
An informant providing valid and credible evidence on a tax offender will have their identity protected to the fullest extent of the law. The IRS will inform whistleblowers of any decisions before proceeding in cases where the whistleblower is an essential witness in a judicial case where any investigation may reveal the identity of the informant.
Conversely, once a claim is submitted by an informant, the informant may only then be privy to the status of the claim and not be given details of the case. The IRS can tell the informant if the case is open or closed and can provide the informant with information about the claim’s award.
A claim can be denied by the IRS if the government already has the information from another source or if an investigation proves no liability on behalf of the taxpayer. The claim can also be denied if the taxpayer is able to appeal the tax case. Informants may also not get the award if it is found that the taxpayer has no assets to collect against for the tax owed.
Reporting a taxpayer for failure to pay taxes is serious business and you need to ensure the information you are providing is accurate and credible or you may find yourself in trouble with the IRS. A whistleblower may need to make some hard decisions before filing a claim with the IRS so if you know someone you could report for failing to pay taxes, think long and hard about the situation at hand and not just about the money.