$10k Challenge: Turn in Tax Cheats

I'm on a quest to raise an additional $10k this year in income -- extra income outside my regular job. The numbers I ran show that making this amount and socking it away year after year can yield quite a sizeable next egg.

I've already suggested ways I'm working on this $10k including the following:

• Make Money at Auctions

• Maximize Your Investments

• Ask for a Raise

• Get Money Owed to You

• Sell Stuff You Own

• Make Money with Credit Cards

• Turn Your Hobby into an Extra Income

Here's the next idea for consideration: turn in tax cheats you may know and get a reward for doing so. The details:

The Internal Revenue Service estimates that the difference between what Americans owe in federal taxes and what they actually pay is about $345 billion annually.

In an effort to close this huge "tax gap," Congress and President Bush in December enacted a measure designed to give people more motivation to tattle on dishonest employers, employees, co-workers, acquaintances and former spouses.

But the enhanced incentives -- in the form of higher cash rewards to those who blow the whistle on tax cheats -- will go only to those informants who provide specific, useful information.

The new law doubles the maximum reward to 30 percent of the total recovered, now including interest as well as tax and penalties.

The more helpful the information, the higher the reward. Those who have allegations but little evidence can get a reward of 1 percent to 10 percent of the amount recovered.

But if the IRS discovers a big tax fraud (one involving at least $2 million in lost revenue) based on specific information provided, especially documents, the informant would get 15 percent to 30 percent of the amount collected.

Here's how you use this idea:

1. Find someone who is cheating the government out of $30,000 or so.

2. Get documentation.

3. Send it in to the IRS.

4. Have them go after the bum.

5. They collect the money.

6. You get $4,500 to $9,000.

Of course you have to be comfortable with the fact that 1) you're a snitch and 2) the person you turn in might not be happy with the fact that you did it (and may want revenge?) That and you actually have to know someone who owes that much, is cheating and you have access to proof.

So maybe it's not such a great idea. Then again, there's $345 billion waiting out there -- someone reading this should be able to turn in something.

Hat tip: Consumerist.

Comments

[T Struck]

I believe the IRS only rewards you if they recoup $2M+. Apparently they don't want to investigate the small tax cheats and want to avoid individuals turning in others because they are in a personal squable i.e. ex-spouse, deadbeat landlords, etc.

Tim
http://struckreviews.blogspot.com/

[Blaine Moore (First Time Home Owner)]

Yeah, I don't foresee myself in a situation where that would be an issue. I'll settle for trying to get my own taxes right.

[wonderer]

Hmm... how much are you pulling in from this blog?

[BoredWealth]

How funny I have the same goal only about $9000 less...lol. I would love to make an extra $10k/year online, but I don't think thats gonna happen. If the start-up company I am promoting on my site is successful then maybe in a few years I'll be pulling in $10k. I have over 550 referrals as we speak. So if each referral is worth 25 cents per month to start off that will help me reach my goal.

[William Tanksley]

I just don't believe the $345 billion figure -- or more accurately, I believe it's offset by ordinary people overpaying their taxes because they fear the IRS and don't understand the system (there's neither means nor motivation for the IRS to determine how big of an issue overpayments are -- and nobody else can look at the IRS's data).