You Can Whistleblow for the IRS

Last week I blogged about whistleblowing provisions in the recently passed Dodd-Frank Financial Reform Act. Today, I turn my attention to our friends at the IRS.

Did you know the IRS has just made it easier for whistle-blowers to collect rewards for turning in big-time tax cheats? The agency new rules are designed to recover the estimated $2 million (a figure that is probably too low) of taxes. Under the old rules, whistle-blowers could get rewards only if their tips resulted in businesses or individuals paying additional taxes. The new rules qualify whistle-blowers for rewards if their tips prevented businesses from claiming fraudulent refunds.

I don't get it. You mean a tipster can contact the IRS and inform them a company or individual is about to file a false tax return? Then, the IRS will contact the company and check it out before the return is filed? The company or individual will, of course, admit to the potential wrongdoing and then the IRS will pay the reward. Huh? Maybe I am missing something here but this makes no sense. Putting aside the ethical issue of loyalty and whether a tipster is acting in his or her own interests as a motivating factor rather than the good of society, is this the kind of behavior we want to encourage?

Actually, I can see one benefit of extending the whistleblowing program and encouraging more tipsters to come forward and claim their awards. We can significantly reduce the unemployment rate if this becomes a national phenomenon. Thousands can be put back to work. Colleges can offer new programs on how to develop a credible tip. I can envision the course now -- Whistleblowing 101. Former tipsters can come into the class and share their experiences. An IRS agent can present on why it's important to come forward. You know, it's your civic duty. The final exam can be to investigate some company or person and send a tip to the IRS. The higher the award, the higher the final course grade.

For those of you who are interested in pursuing this new career, go to the IRS website for specific details (http://www.irs.gov/compliance/article/0,,id=180171,00.html).