Snapshot of the IRS Income Tax Reward Program
On December 20, 2006 Congress created a new IRS income tax reward program. It is modeled after the DOJ reward program, but applies specifically to tax cheaters. This program allows you to receive a reward of up to 30% of the amount the IRS recovers back from unpaid taxes as a result of your submission. Although much of the program is the same as the DOJ program, there are some significant differences.
First, you do not need to prove that the company or individual intended to cheat on taxes. Rather, all that needs to be shown is that they underpaid taxes within the last three years. However, if you show that they intended to cheat, the IRS can collect for as many years that they committed tax fraud.
Another notable difference is who the IRS reward program affects.
The new program only applies when the underreported taxes by a person or company amounts to $2 million. Be mindful that to show underpayment of taxes by this amount, you may need to establish that the company claimed improper deductions or hid income by $7 million (assuming a 28% tax bracket). In addition, if you allege a person underreported taxes, not only must you establish the $2 million amount, but the person cheating must have had a gross income of at least $200,000 during one of the tax years at issue. In other words, the new reward program does not apply to smaller tax fraud cases.