Wednesday, November 25, 2009

IRS Makes Tax snitching much more profitable

For years the IRS grudgingly paid stingy rewards to squealers who brought it mostly small cases; during 2004 and 2005, 428 informants received a total of $12 million--only 7% of the paltry $168 million all their leads brought in. But in 2006, hoping to entice insiders to rat out big-dollar cheats and corporate tax shelters and games, Congress directed the IRS to pay tipsters at least 15% and as much as 30% of taxes, penalties and interest collected in cases where $2 million or more is at stake.

The gambit seems to be working very well. The IRS continues to get thousands of small case tips a year. But in fiscal 2009, ended Oct. 30, the IRS Whistleblower Office also logged big case leads on 1,900 taxpayers, up from 1,246 in fiscal 2008, the fIRSt full year the new law was in effect. Dozens of these tips involve purported tax losses of $100 million or more. Sure, those are just allegations. But informants "often provide extensive documentation to support their claims,'' the Whistleblower Office noted in a report. The Treasury Inspector General for Tax Administration, in a separate report, added up all the 2008 tips and found that $65 billion in unreported income was alleged.