No we are not going to talk about rodents but we are going to talk about the two legged kind, otherwise know as whistle blowers, snitches, informants, or good citizens depending upon to whom you are talking. These are the people who will turn you in to the IRS if they know you have violated the Internal Revenue Code, in other words, cheated on your taxes. What motivates people to turn in their fellow citizens? Most likely, some do it out of a sense of patriotism, others have the attitude that if they have to pay so do you, some may be motivated by revenge and others just do it for the money. For the money? Yes for the money. For years now the IRS has had a program of rewarding those who inform on people from whom the IRS was successfully able to collect delinquent taxes and penalties. This process is called the IRS Rewards Program, read on for the details of this program as recently revised by the IRS.

Any individual may file a claim for a reward unless you were employed by the Department of the Treasury at the time you received or provided the information, or you are a present or former employee who received the information in the course of your official duties. Rewards are available for information involving criminal and civil tax law violations. The IRS will determine whether a reward will be paid and the amount. The information provided will be evaluated in relation to the facts developed by the resulting investigation. Rewards can be as high as 15 percent of the amount recovered in taxes and penalties (but not interest) from the delinquent taxpayer, with the total reward not exceeding $2 million.

• The 15 percent rate applies to specific information responsible for the investigation, which was also a direct factor in the recovery.
• A 10 percent reward is available for information resulting in an investigation and determination of tax liabilities although not specific.
• A 1 percent reward is available for information leading to an investigation, but had no direct relationship to the determination of the tax liabilities, for an example, you supplied merely a name.

In short, the more specific and detailed your information is to the investigation and recovery of tax, penalties and fines, the higher your reward! Federal disclosure laws prohibit the Internal Revenue Service from providing any information relating to investigations, therefore, all names remain confidential. It can take two or more years before there is a final disposition of the investigation. Even then, the IRS will not disclose specific actions taken regarding the investigation.

To file a claim for reward, you must complete Form 211, Application for Reward for Original Information. Your true name must be used on the form with an original signature. Upon completion, Form 211 can be mailed to the Informants Claim Examiner at the IRS center for your area. Addresses are listed on the back of Form 211. For more information, call the Informant Communication Hotline at 800-829-0433.

So why is the IRS publicizing the IRS Reward Program? In our opinion it has to do with what has been happening at the IRS since the major revisions in the tax laws that occurred in the past few years in the spirit of being "Kinder and Gentler" as dictated by congress. These changes enacted by Congress in the Tax Reforms Acts of 1998 and 1999, cut IRS spending sharply and required the agency to devote more resources to customer service. Congress characterized the IRS as an agency out of control and that was intruding far too deeply in to the lives of Americans. The backlash to this came from within the IRS as many employees quit. The IRS is begging for employees at this time.

As reported in the New York Times, the overall audit rates fell to record lows last year. Of the 120 million individual tax returns, only one in 217 was audited, down 36 percent from 1994. During the same period , the number of returns reflecting incomes of $100,000 and up grew 62 percent to 6 million. The audit data shows a reversal of a trend that emerged a few years ago in which audits rose for Americans making less than $25,000. Last year, 1 in 370 such returns were audited, down from 1 in 178 in 1994. The IRS is relying on the increased reporting required by employers , lenders and others including casinos and card rooms. The former chairwoman of the American Bar Association's tax section said that the IRS is paying too little attention to privately owned businesses (corporations and partnership). "They have not gotten much in they way of audit coverage and this is where there is lots of room to play games" The IRS has long audited sole proprietors such as professional gamblers very closely.

It appears to us, that the IRS is pushing the Rewards Program in an attempt to get the private citizens to act as auditors or the tax police, to overcome the changes dictated to the IRS. Maybe you should be more careful who you alienate at the tables.