Do The Right Thing and Become A Tax Fraud Whistleblower

Defrauding the government of billions of dollars in taxes is nothing new. Both individuals and organisations have been doing it for years. The government has known for a long time that on its own it will never be able to combat tax fraud. For those Americans who religiously pay their taxes, grudgingly perhaps, but nonetheless obeying the law, the fact that others don’t has been a constant grumble. Now they too, can do something about it.

Tax fraud affects everyone and with not enough government money in the pot to go around, it is inevitable that some public services receive reduced funding. It could be a school, a healthcare facility, or even repairing roads, but somewhere down the line it will affect you.

What constitutes Tax Fraud?

  • Tax fraud schemes can come in all shapes and sizes, but the more common ones are:

  • Not filing an income tax returns form.

  • Not showing any income from cash transactions.

  • Claiming business expenses when they were actually personal expenses.

  • Transferring money or assets from the US.

  • Making false entries in accounting records and books, or, even keeping two different sets of books.

  • Overstating the amount of deductions.

  • Overstating the number of children or dependants.

    • And so the list goes on, from the scheme that the every day guy may think of, to the bigger swindles that the large organisations come up with.

    How you can help and get rewarded.

    Previously, for reporting tax fraud and maybe saving the government millions of dollars, there was no reward. You just did it as a concerned citizen, knowing it was the right thing to do. Unlike those that reported defense, healthcare or other kinds of fraud and were often generously rewarded for coming forward with the information.

    Tax fraud is covered under different legislation called the Tax Relief and Health Care Act. In December 2006, an amendment was made to this act that stated financial rewards should be available to anyone who had knowledge or evidence of tax fraud. For years the rewards had been non existent or stingy to say the least but the new legislation allows for a more generous pay out for information received of between 15-30% of the total sum recovered.

    The Tax Fraud whistleblower is afforded protection, (exactly the same as other whistleblowers) against retaliatory or retributive action, meaning they may not be dismissed or suspended from their place of work or harassed or threatened in any way by their employer.

    A lawsuit may only be filed against a company if the amount being defrauded is in excess of two million dollars. With an individual the criteria for filing a suit against unpaid taxes, is that the person's yearly income is in excess of $200,000.

    Is the incentive of receiving a monetary reward working?

    The answer to that would have to be yes. In 2004/2005 before the new legislation was brought in, 428 tax informants received a total of twelve million dollars between them. Considering they brought in unpaid revenue to the government of $168 million the amount they received seemed paltry, equating to just 7%.

    With the promise of larger rewards, it seems more people are prepared to put their neck on the block and blow the whistle on tax frauds.

    The Internal Revenue Services (IRS) receives thousands of tip-offs relating to the ‘little guys’ every year, but in the year 2009, up to and including October, they also had leads on 1900 taxpayers, with many of the cases claiming tax losses in excess of $100 million.

    This figure was up by just over 500 reported tax fraud cases on the previous year. That being said, in a report published by Treasury Director General for Tax Administration, the department had added up all the tip-offs received in 2008 and they came to a staggering $65 billion in alleged tax fraud.

    Report tax fraud and do the right thing, don’t just ignore it, it really does affect each and every citizen in the US.