Rat out your neighbors, get paid by the IRS


Through an IRS whistle-blower program, you can anonymously report tax cheats and earn a windfall from their dishonesty. Here's how it works.

By SmartMoney

There's a new sheriff in town, and his name is John Doe.

He may be sitting in the cubicle next to you.

Under a 2006 congressional mandate to the Internal Revenue Service, ordinary citizens can help the tax man cometh -- or at least collect. The Whistleblower Office is the IRS' attempt to give incentives for you to rat out the tax cheats you know.

That's right. If your employer, co-worker, landlord, neighbor or father-in-law is raking in fistfuls of cash and bypassing Uncle Sam, you can anonymously report the abuse to the IRS and snag a windfall from their dishonesty. As long as the total amount of tax fraud comes out to at least $2 million -- including penalties, interest and whatever else the government ultimately collects based on your report -- you can get a 15% to 30% cut. If the taxpayer is an individual, his or her gross income must also exceed $200,000 for the year at issue.

The IRS modeled the program on the Department of Justice's successful False Claims Act, which has been in place since the Civil War era and attracts tips about fraudulent claims against federal government programs.
Whistle-blowers' new image
Ratting on your boss or ex-husband might sound sleazy, but whistle-blowers have taken on a more venerable image in recent years. That's especially true since the Enron era, when the few employees who spoke up about the company's misconduct were seen as folk heroes after the full extent of wrongdoing came to light.

Snitching on tax cheats wasn't always so welcome. The previous incarnation of the program was criticized for offering inadequate incentives and protections for would-be whistle-blowers to come forward.

"It was ineffective by almost anyone's description," says Michael Sullivan, an attorney with Finch McCranie, an Atlanta law firm, which runs the Whistleblower Lawyer Blog. "It produced very little recovery for the IRS."

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