Now, it just might pay to blow the whistle

Steve Tripoli Dec 20, 2006

KAI RYSSDAL: You’ve got about 11 more days to finish up your end of year tax planning. That is if you plan to pay taxes. Truth is not everyone does. And for years the IRS has encouraged the rest of us to snitch. When other folks cheat on their taxes you and I are the losers, right? Well, not always. President Bush signed a big tax and trade bill today. Part of it made blowing the whistle on tax cheats far more profitable. Easier too. Marketplace’s Steve Tripoli has the story.

STEVE TRIPOLLI: The bill aims at the big fish, tax cheats whose underpayment starts at around $2 million. Washington tax attorney Erika Kelton says unleashing whistleblowers on that group should pay the government handsomely.

ERIKA KELTON: I expect that revenues from tax evasion are going to increase into the billions over 10 years. I would expect in the tens of billions of dollars.

It should pay whistleblowers handsomely, too. Under the new law they can take home up to 30 percent of what the government recovers. The law gives them ways to be sure they get their share, too. Chasing the government for payment has been a complaint.

San Francisco tax attorney Paul Scott says incentives this good should produce a whole new class of whistleblowers.

PAUL SCOTT: With the provisions that they have now, people with quality information who have something to risk, those folks are now gonna be in line and thinking seriously about coming forward.

The Internal Revenue Service has been slow to crack down on tax fraud that by its own estimate amounts to $290 billion a year. Erika Kelton predicts that once the new law is up and running, it will change the way the IRS thinks.

KELTON: The culture at the IRS will be more accommodating and more open to whistleblowers. And I think also over time the value of the information will, in itself encourage the IRS to be more welcoming and more open to whistleblowers.

By the way, if you score one of these rewards? Don’t forget to declare it on your tax return. It’s income, silly. And more people than ever may be watching.

I’m Steve Tripoli for Marketplace.

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