If you're in a position to know that your employer (or any company or wealthy individual, for that matter) is cheating the IRS, you may soon have a new incentive to blow a whistle. Satisfaction from serving justice may be a sufficient reward, but Congress and the IRS are looking into offering whistle-blowers a chunk of the recovered taxes and penalties -- and a big chunk, at that.
If you're able to provide substantial information that helps the IRS build its case, you may get 15% to 30% of the haul. For lesser contributions, you may still collect up to 10%.
According to an Associated Press report, our friends at the IRS are proposing a "Whistle-blower Office" to help IRS agents collect information and, ultimately, monies due. The plan is to target people and companies that take in more than $200,000 and have hidden $20,000 or more.
The arrangement echoes the False Claims Act, which permits individuals to sue companies and people that have pulled a fast one on Uncle Sam in non-tax-related matters. According to the Justice Department, the False Claims Act was responsible for the collection of $1.5 billion in 2003, $319 million of which (about 20%) went to whistle-blowers. In nearly 20 years, the act has led to the recovery of more than $12 billion.
Charles Grassley (R-IA), chairman of the Senate Finance Committee, said, "Taking advantage of whistle-blowers has saved the taxpayers billions of dollars in defense and health-care fraud. The potential is even greater with tax fraud, given the estimated hundreds of billions of dollars of taxes due that go uncollected each year."
The proposal, which has yet to be supported by the House of Representatives, seems to be a win-win-win one. The government gets help pressing cases against tax avoiders, taxpayers have to bear less of a burden when more people and companies pay their fair share, and whistle-blowers win, too. Whistle-blowing typically isn't an easy thing to do, and it sometimes ends careers: Rewarding someone for taking a stand and taking on a lot of risk seems rather reasonable.
Whistle-blowing has played a part in investigations into or scandals surrounding Tenet Healthcare (NYSE: THC), Enron, WorldCom, Kerr-McGee (NYSE: KMG), and even Coca-Cola (NYSE: KO) (read all about it). Learn more about whistle-blowing in this Fool article by a whistle-blowing litigator.
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Selena Maranjian
does not own shares of any companies mentioned in this article.
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