Want to Become an Informant For the IRS? Know the Rules
You may be coming across many ‘clues’ about people enjoying a flashy lifestyle by hiding their income from IRS. As an honest taxpayer, you can pass on this information to the IRS and get some reward in the bargain.
If you suspect that someone is evading taxes, you can become an IRS informant to get his fraud exposed. You can start the process by making a single phone call. If you contact the Informant Communication Hot-line, they will be able to register your information for further investigation. If you want your effort to be rewarded, that time itself you should inform them that you wish to file Form 211. You have to be very clear on this. If you forget to mention about the reward or Form 211, you may not be able to claim any reward later.
In this form, you have to enter your name, fill in all other details and then sign it. If you want to claim a reward, you must disclose your real name. Your details are kept strictly confidential. You should mail this form to the IRS center, addressing it to Informants Claim Examiner.
You should not file this form just for taking revenge. You must have some substantial information which IRS is not able to access so far. Just informing the IRS about something which is available on public records will not be of any use. The information should lead to the recovery of substantial revenue.
If the information supplied by you is very specific and leading to a successful recovery of taxes, you can get 15 per cent of such recovered amount. If the information is not specific, but it has resulted into an investigation and IRS is successful in recovering money from the tax evader, you can get 10 per cent of the money recovered. If you supply only general information which is not directly pointing at any particular evasion but it has resulted into recovering tax dues later, you can still get 1 per cent of the recovery. So it is very important to furnish as much information as you can. The information like – my neighbor has bought a new Mercedes car by not reporting some of his income – is a very vague clue and you cannot expect a reward from IRS for your efforts! On the other hand, if you are working as an accountant for someone and you are able to furnish full details of tax evasion effort of that person, you can expect handsome reward.
Even if you submitted all useful information, remember, the rewards are not mandatory. They are absolutely at the discretion of IRS. So you cannot go to the court for such rewards. Another important factor is – IRS will send you a check only after making full recovery of the dues which may take years. If you want to get the reward quickly, you can write to IRS that you want the reward immediately and will accept it as full and final. In that case, you will be paid a percentage of the money recovered until then. Whatever money you receive, you will have to report it on your tax return and pay tax on it.
The idea of becoming an informant for the IRS looks lucrative in the beginning but you cannot plan it as your full-time occupation neither you can expect a definite time schedule for receiving such money.