WhistleblowingFollow

Do ever wonder what it would be like to be a professional tattletale, or how great it would be to get back at some jerk you know doesn't pay taxes? Well, wonder no more!

Recently I attended a tax seminar. I won't bore you with the details, but I found one point in particular very interesting: new whistleblowing rules/rewards.

Whistleblowing (or narking) is roughly defined as turning in an individual to an authority department for misdeeds. As far as the IRS is concerned, said individual would have to be violating tax law, and violating tax law can run as simple as not filing a tax return to as complicated as purposely not using a half-year convention on the first year of MACRS 200% double declining balance depreciation.

The kicker behind this is that under old law, the minimum reward for whistleblowing was $100 while the max was 15% of the amount collected from the offender. Under new law, it's a minimum of 15% of the amount collected with a max of 30%.

Example: Bizzy Ness owns a bakery by herself and hasn't paid her self-employment tax on her Sch. C for 3 years because she hasn't filed a tax return. Bizzy is your employer and you recently found out that she didn't pay you overtime last week, ran over your dog, and hacked your online gaming account. In absolute fury, you decide to hurt her the only way you know how--through anonymous tipping! Bizzy receives an IRS letter 6-8 weeks later. Bizzy hires an accountant who does her taxes. She finds out that she owes $15,000 in back taxes. She writes a check and mails to the IRS. Two months later she recieves another bill from the IRS that computed her interest and penalties for the three years that she didn't file. She now owes another $15,000 and pays that, totalling an overall payment of $30,000. You then find a check in your mailbox from the IRS for $4,500-$9,000. "Nice," you think to yourself.

But do examples like this really apply to real life? In a perfect wor--hmmm...no. All kinds of crazy legal fees would apply and most of your whistleblower income would go to that. However, (to sweeten the deal) any attorney fees and court costs are directly deducted from the money you received. Any legal costs that go above the income you received from your whistleblowing check is then put on the Sch. A under the 2% limitation.

My favorite thing about this though, is that the income you receive, provided you didn't have any legal fees, goes on your tax return and is then taxed--HAH. You thought the IRS was your friend? Guess again.

I hope I didn't make anyone's brain explode.

Edit: speling


Edited, Nov 7th 2007 5:36pm by AngryBystander

Either you people are speed readers or I had a massive stroke which caused me to lose all sorts of time.

It probably is spelled Narc. I'm not changing it--nyah~

I think I should be able to pay in hydrogen molecules. I can carry millions at any time, I shall be rich!

You have to file your claim for whistleblowing, but yes, this does happen. We did have a client who a number of years ago that wanted to get back at someone for some drama that ensued over something. She blew the whistle, investigation commenced, penalties were paid, she filed a claim and got some cash.