The Tax Cheat Who Loved Me

Got a former lover, friend, or boss who's cut corners on a tax return? The IRS has a little-publicized program for you...

Theoretically, at least, there are two ways to get paid for information to the IRS. Either you can request a fee up-front, in which case the information has to be really promising. Or you can wait around until unpaid taxes are collected, which can take up to six years. The pay scheme in the latter case goes like this: For "specific and responsible information that caused the investigation and resulted in recovery," the agency offers 10 percent of the first $75,000, 5 percent of the next $25,000, and 1 percent of anything more. For slightly less valuable information, they pay 5 percent of the first $75,000, 2.5 percent of the next $25,000, and .5 percent of the rest. And for information that "caused the investigation but was of no value in determining tax due," the payment is 1 percent of the first $75,000 and .5 percent of anything additional. The cap on payments, unless a waiver is sought, is $100,000.

The other catch is that you have to initiate any discussions of a reward. Agents are told not to bring it up. "We never volunteered that a reward was available," recalls Urbanski. "If they didn't ask for it, we didn't tell them. It was an unwritten policy. The IRS would deny that. We never volunteered that unless we felt the information was valuable and the person was afraid to volunteer it. We might have people still working with the person they are informing on. We might want them to work undercover."

Peterson says money didn't appear to be the main motivation for most callers, anyway. They simply wanted to see somebody go down in flames. "Why offer it to people," he says, "if you can get it for free?"

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