Report a Tax Cheat for a Feel Good Reward
Tax fraud and tax cheats – don’t you hate them? I don’t blog about making money online or selling stuff on eBay. On the other hand, where there is money to be made by exposing tax cheats for who they are, Mr. ToughMoneyLove is behind that cash for trash program 100%.
You Can Be a Tax Fraud Bounty Hunter
We – the law abiding taxpayers – can be amateur tax bounty hunters. All we need to do is rat out a fellow citizen (or business) that makes a habit of moving decimal points on their federal tax returns. In fact, even though we are not professional tax bounty hunters, we can get paid for blowing the whistle on tax fraud. The IRS has laws and regulations that explain this.
Do you know of any likely suspects? Maybe an evil supervisor (think “The Shawshank Redemption” or “Office Space”) or that jerk of a brother-in-law? Read on.
The IRS Whistleblower Office (wouldn’t it be fun to work there – just for a month or two) administers the “turn in a tax cheat” program. This is how the Whistleblower Office explains its mission:
The IRS Whistleblower Office pays money to people who blow the whistle on persons who fail to pay the tax that they owe. If the IRS uses information provided by the whistleblower, it can award the whistleblower up to 30 percent of the additional tax, penalty and other amounts it collects.
The IRS may pay awards to people who provide specific and credible information to the IRS if the information results in the collection of taxes, penalties, interest or other amounts from the noncompliant taxpayer.
The IRS is looking for solid information, not an “educated guess” or unsupported speculation. We are also looking for a significant Federal tax issue – this is not a program for resolving personal problems or disputes about a business relationship.
Yeah – that last sentence is a bummer if you want to get even with your ex.
There are actually two different paths you can follow to get a tax whistleblower reward. The first is under Section 7623(b) of the Internal Revenue Code. This is the best path to take because the reward (15-30% of the tax recovered) is basically mandated by law, with rights of appeal if you are denied your bounty. The problem is that the amount in dispute (unpaid taxes, penalties, and interest) must be at least $2 million. Also, if the tax cheat is an individual, their gross income must be at least $200k.
But don’t give up. The second path to a tax whistleblower award applies to less egregious tax cheats. The guy next door maybe. These rules are under IRS Code Section 7623(a) and 26 C.F.R. § 301.7623-1. The amounts in dispute can be far less than $2 million but the reward is not mandated. Instead, it is up to the discretion of the Commissioner. The maximum discretionary award is 15% of the tax recovered, up to $10 million. I’m good with that.
This part you also will like: You can remain anonymous unless your testimony is necessary to prove the existence of the fraud.
You can find all of the information you need to report a tax cheat at the IRS Whistleblower website.
If you want to report some possible tax fraud activity just for the fun of it (without claiming a reward) use IRS Form 3949-A. There are a few fraud candidates working for the White House and in Congress but the IRS already knows about them.
So my fellow honest taxpayers, the tax filing deadline has passed. We know some cheatin’ has been goin’ on. What say we go bounty hunting?
Photo credit: uuzinger