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IRS SNITCH: A LESS THAN LUCRATIVE CAREER?

June 12, 2006

Tax lawyer Kreig Mitchell looks at the the new Treasury Inspector General's report on the IRS informant reward program.

There can be little doubt that most informant claims are rejected. Even if a claim is paid by the IRS, it is likely that the information provided will be deemed to "have no direct relationship to the determination of the tax liability" - which results in a mere 1% payment. Even then, the audit report indicates that it may take up to seven and one half years to receive payment. Given these constraints, potential informants should engage a tax lawyer to help them present their claim in a way that increases the chances that they will be compensated and be compensated sooner rather than later.

The informant program netted $340 million from 2001-2005 - a surprisingly small amount, it seems to me. In light of the paltry rewards, though, maybe I shouldn't be surprised.

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