Millions of Americans earn their living collecting commissions on various products and services. Insurance agents collect commissions on premiums they write. Real estate agents collect commissions on homes they sell. Car salesmen, retail salespeople, and even restaurant servers all earn a piece of the business they generate.
Did you know there's a way to earn "commissions" on someone's taxes? That's right — tax whistleblowers can earn "commissions" of up to 30% of underpaid tax, plus penalties, interest, and other amounts they help recover. You'll need to give the IRS "specific and credible information" about a case that leads to collection — not just educated guesses or unsupported speculation. (As the IRS says, "this is not a program for resolving personal problems or disputes about a business relationship." Of course, if your jerk of an ex-husband or crook of an ex-partner really is a tax cheat, that's a different story!) You'll use Form 211 to file your report. And Internal Revenue Manual Section 25.2.2.9.2 outlines a predictably complicated formula for calculating just how much you'll get — but don't worry, if you don't like your booty, you can appeal it to the Tax Court!
The Treasury has been authorized to pay bounties for tax cheats since as far back as 1867. (No doubt they delivered rewards by Pony Express.) The program picked up steam in 1996, when the Taxpayer Bill of Rights authorized rewards for reporting mere underpayments in addition to outright cheating. And the Tax Relief and Health Care Act of 2006 created a dedicated Whistleblower Office, dedicated to tax underpayments topping $2 million. Since launching the new office, which has about 17 employees, the IRS has gotten 9,540 claims from 1,387 whistleblowers. Hundreds of those tips alleged tax underpayments topping $10 million, with dozens more alleging underpayments topping $100 million. Clearly there's big money — and big rewards — at stake.
What's the catch? Well, if you want to make a living tattling on taxpayers, you'll have to be prepared to wait for your reward. And wait . . . and wait . . . and wait. First the IRS has to audit the targeted returns to verify your claims. Taxpayers can appeal those findings and exercise other rights that add years to the process. And taxpayer privacy laws that prohibit the IRS from even acknowledging that your target is being audited make it impossible to just "check in" with the IRS on the status of "your" claim. The General Accounting Office reports that over two-thirds of the claims submitted as far back as 2007 and 2008 are still being processed.
But there is light at the end of the tunnel. Back in 2007, an in-house accountant tipped the IRS off to a $20 million underpayment by his financial-services employer. After hearing nothing for two years, he hired an attorney to follow up. Finally, this April, the IRS paid him a whopping $4.5 million reward. (It sure beats finding lost puppies for $100 a head!)
Oh, and because we know you'll ask — yes, you'll owe tax on your "commission." In fact, the IRS will helpfully withhold 28% of any award topping $10,000!
Of course, there's an easier way to slice the IRS pie. A good tax plan is the key to keeping the most of what you earn. And no one will call you a rat! But time is running out to plan for 2011. So, at the risk of sounding like a broken record, call us now for the plan you deserve. Your holiday season will be even brighter, knowing there's nothing more for the IRS to collect from you!
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