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For those Americans who would like to make some extra cash by reporting on friends or family who cheat on their taxes, the IRS has two whistleblower programs. Both programs run off of a central principal that the larger the amount of money recouped, the more money given to the whistleblower.

The first program is a small-awards program for cases involving under $2 million in unpaid taxes. For this program, whistleblowers can earn as much as 15 percent of the amount recouped, though it is unusual to make that much. The second program is a large-awards program, which involves cases of unpaid taxes over $2 million dollars. For these cases, whistleblowers can make significantly more money, with rewards reaching as much as 30 percent.

Participating in the Whistleblower Program

The IRS states that they are looking for "specific and credible" information only. This means that potential whistleblowers must ensure they have a thorough case before approaching the IRS. Information should be recent, as well, because the statute of limitations on both corporate and individual tax cases is three years.

Whistleblowers should, ideally, also have not profited from the tax evasion. If the informant was involved in the fraudulent activities, the IRS reserves the right to reduce awards in the large-case program to under 15 percent.

Concerns over Program Efficacy

While in theory the whistleblower programs seem profitable, they have numerous critics. The primary critique is that the IRS only addresses several accusations of tax fraud per year, and they can take several years to resolve. In addition, whistleblowers must conduct significant amounts of research in order to gather enough evidence to garner the attention of the IRS, and then there is no guarantee of protection from retaliation.

In addition, recent reports on the whistleblower initiative suggest that the programs are not only slow but also inefficient and difficult for ordinary citizens to navigate. The U.S. Government Accountability Office has conducted a thorough review of the large-award tax program, looking particularly at IRS data collection and reporting methods.

The report recommended that the IRS change the way it currently tracks cases and reports findings to Congress. It also suggested that, at present, the whistleblower program is inefficient in its approval of cases for review. The current review system supposedly results in many cases with merit being refused and overlooked. Statistics report that in 2011 the IRS received whistleblower claims involving 9,500 taxpayers but rejected approximately 1,300 of the total claims.

In addition, many lawyers have expressed frustration with the slow pace at which whistleblower cases are processed. It typically takes the IRS around three years to determine the validity of a case. More than 200 whistleblower cases that have been in process for two years or more have still not made it past the initial stages.

Christopher understands that financial hardships can affect honest, hard-working people. Growing up in a very blue collar family and rural area of Indiana, money didn't always come easy for his parents. The struggles his family faced in his childhood made a significant impression on his business philosophy today. As a Fort Worth tax attorney his practice has given him the opportunity to help many people stop wage garnishment, IRS harassment and resolve their tax debts.

By Christopher T Lee
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