A new way to earn some extra money: IRS informant

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Your odds of actually collecting any money as a tax informer are probably pretty low, and the cases can often take years to work their way through the system. Nonetheless, the IRS does offer a finder's fee to people who are instrumental in busting tax cheats.

Last year, the amount that tax informants would be paid was increased to up to 30% of any money the IRS collects in a case. This enhanced whistleblower reward was done to encourage honest citizens to give more help to the IRS. The IRS estimates that $290 billion goes unpaid each year because of people and companies cheating on their taxes.

Recently, informants ratted out two very large companies for cheating on their taxes, representing a total of over $3 billion of taxes, penalties, and interest if the claims turn out to be true. But the whistleblowers will have to wait to collect any money. The cases must be fully resolved (which can take years) and the IRS has to actually collect money from the companies. If no money is collected, there is no reward.

If you have information for the IRS, don't be afraid to report it. But just remember that calling them and saying you "know" your brother is cheating on his taxes won't get them to do anything. They want details and proof. Without both of those, they almost certainly won't look into the matter.

Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Accounting, and is the author of Essentials of Corporate Fraud.
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