Making tax cheats pay
up and pay off
Do you know a
tax cheat? Turn him in for fun and profit!
There's no shame
in ratting on rats. After all, every buck they hide from Uncle Sam ultimately
means more tax for the rest of us. You can justifiably stake the moral high ground
by exposing these shirkers, especially if they've been cheating you out of child
support or rubbing their shiny new Jag in your face. That's the fun part.
about that profit part. If you provide sufficiently detailed information on a
tax cheat to the Criminal
Investigation unit of the Internal Revenue Service, you may receive up to
15 percent of the amount recovered in taxes and penalties (but not interest) as
a tip for your tip.
But don't start shopping for that beachfront
in Hawaii just yet. To have a chance at collecting on your high-living relative
or slimy former boss, you have to have the goods, follow procedures, ask for a
reward and wait an awfully long time -- up to two years and more -- for the wheels
of justice to turn. Even then, the IRS is under no obligation to give you a dime.
determined from a study that one in 10 informants actually asks for a reward and
approximately one in 10 of those gets one," says Jeaneen Heiskell, IRS senior
Millions paid, more
In 2003, informant information
prompted the IRS to pay $4.1 million in rewards. That was down from fiscal 2002,
when $7.7 million in rewards to tipsters led to $66.9 million recovered in taxes,
fines, penalties and interest. (The reward/recovery figures do not correlate because
a reward is rarely paid in the same year the claim was filed.) The record year
was 2000, when $10.8 million went to those who ratted out tax-cheating friends,
family and coworkers.
While your reward could be handsome indeed,
the money actually recovered amounts to a drop in the bucket for the IRS, which
may explain the program's relatively low profile.
put it in perspective, the IRS collects more than $2 trillion a year; we have
something like 227 million returns that we process every year," says IRS
spokeswoman Nancy Mathis. "There are only 100,000 IRS employees. It's just
difficult to keep up the pace. The $66.9 million is not a big figure in the scheme
of things, but every little bit helps."
Ready to put some
of that "little bit" of tax revenue into your own pocket? If you've
got the dope on a tax dodger, here's how to jumpstart your early-retirement account.
in a tax cheat
You could be just a
phone call away from riches. Just dial the Informant Communication Hotline at
1-800-829-0433. Be sure to tell them upfront that you want to file Form 211, Application
for Reward for Original Information. Without it, you won't see any monetary reward.
211 will ask for your true name and signature. Mail it to the Informants Claim
Examiner at the IRS center nearest you. Addresses are listed on the back of the
form or call the Informant Communication Hotline for help.
where the quality of your information is critical. IRS investigators are swamped
with leads, most of them more vindictive than substantial, and understandably
tend to pursue those with the best likelihood of recovering substantial revenue.
information you provide could be rewarded by the IRS on one of three levels based
on the amount recovered:
- 15 percent for specific information
responsible for the investigation and a factor in the recovery,
percent for information, but not specific, resulting in an investigation and determination
of tax liabilities and
- 1 percent for information
leading to an investigation, but with no direct relationship to the determination
of the tax liabilities (for instance, you only supplied a name).
increase your reward chances, provide as much detail as you can. The IRS is especially
grateful when informants have the tax cheat's full name, address, Social Security
number, tax years involved, types of violation, bank account information and any
documentation you might have to support your claims.
somebody just says, 'My next door neighbor just pulled up in a new Jaguar, I know
he's not reporting all of his income," that is not very useful information,"
says Laurie Levin, director of Internal-External Stakeholders for the IRS. "On
the extreme other side, 'I was the bookkeeper for this company and during that
period of time, this is what Bob had me doing with the books and by the way, here's
a copy,' that's clearly 15 percent. It absolutely depends upon the type of information,
the quality and detail of the information and the amount."