Tattling for Dollars: The Growing Ranks of IRS Informants

tax informantThe numbers of people who are informing the IRS about delinquent taxpayers is growing.

The agency gets about 40 to 50 tips a month from ex-spouses, disgruntled business associates and other individuals angry at someone they believe is cheating Uncle Sam, reports Bloomberg, because they can get a potential reward of 15% to 30% of the money collected in excess of $2 million.

Inundated With Tips

Ever since Congress passedThe Tax Relief and Health Care Act of 2006, the Internal Revenue Service has been inundated with tips from people eager to help the agency recoup back taxes because of the possible rewards. Previously, it was up to the government's discretion whether a tipster would get a payout, which was capped at $10 million. Now, there's big money to be made.

"After the law was enacted, the Miami-based Ferraro Law Firm, which specialized in personal-injury cases involving cancers related to asbestos, opened a Washington office that recruits and represents clients making such claims," Bloomberg reports. "The firm has said it made several claims alleging more than $1 billion in unpaid taxes."

Ferraro could not immediately be reached for comment. Erika Kelton, a partner at Phillips & Cohen who represents whistleblowers, says the IRS has received information from informants that it wouldn't have obtained otherwise. She notes that over three years, thousands of cases have been filed, dozens of which are valued at more than $100 million, adding: "The IRS can only be at so many places at once."

IRS Under Pressure to Collect

Bradley Birkenfeld, the former UBS (UBS) banker who blew the whistle on a massive tax evasion scheme by wealthy Americans, is reportedly seeking a reward in the billions. The Swiss bank agreed to pay a $780 million fine to settle allegations related to the information he provided authorities.

Federal officials in turn have argued that Birkenfeld deserves no money because he played a role in the tax evasion by helping billionaire Igor Olenicoff cheat on his taxes, a crime for which he's serving a 40-month jail term. The New York Daily News recently did a jailhouse interview with the banker where he claimed that some U.S. politicians also kept secret accounts at the bank. UBS denied the accusation.

In the current economic downturn, the IRS is facing additional pressure to collect taxes. Those who need the agency's help often have trouble getting it. According to the IRS's National Taxpayer Advocate, an in-house consumer watchdog, the agency made the fewest agreements with taxpayers in a decade to settle their debt for less than the full amount due.

Doing the Right Thing -- Eventually

Tax authorities continue to rely on taxpayers to do the right thing, and most do. According to the IRS, the compliance rate is about 85%. The laggards can often rely on tax amnesties at the state and local level. For instance, delinquent Pennsylvania taxpayers who pay up by June 18 can have their penalties waved and their interest charges slashed by 50%. Ads have blanketed the state proclaiming, "If you owe PA back taxes, we know who you are."

At the federal level, officials know plenty of people who know delinquent taxpayers and probably don't like them.

Top Tax Deductions for Consultants

Consultants are likely to have deductible business expenses that can help you save big on your taxes. A checklist can help you account for every deduction you’re entitled to use. Here are the top tax deductions for consultants.

Read More

Brought to you by TurboTax.com

Seven Things You Didn't Know About Taxes

You know your federal taxes pay for government programs and services, like roads and national defense. And you may even know the difference between FICA and income tax. But did you know if you want to buy sparklers in West Virginia, you can expect to pay a special fee?

Read More

Brought to you by TurboTax.com

2018 Tax Reform Impact: What You Should Know

Congress has passed the largest piece of tax reform legislation in more than three decades. The bill will affect the taxes of most taxpayers, but one key point to keep in mind is that for most people, the bill won't affect your taxes for 2017 (the one you file in 2018).

Read More

Brought to you by TurboTax.com

Video: How to Estimate the Value of Clothing for IRS Deductions

Learn how to estimate the value of clothing for IRS tax deductions as charitable donations. The value of clothing donations to charity are based on published lists of retail values or current thrift store prices. List your donation values on the Form 8283 with the help of TurboTax in this video on filing annual taxes.

Read More

Brought to you by TurboTax.com
Read Full Story