It may resemble a chapter out of 1984 but the recent surge of whistle blowers to the IRS about tax cheats comes as no surprise since these whistleblowers are getting paid enormous sums of money for “telling on their neighbors” for owing back taxes.

A recent Forbes article revealed that a new federal rewards program dishes out cash to people who turn in friends, relatives and employers for fudging their tax returns.

Take Bradley C. Birkenfeld, a former employee of UBS AG, who came to U.S. officials with documents in hand and laid out how his former employer, UBS AG, helped wealthy Americans hide money offshore. So far the investigation he triggered has produced a $780 million payment in back taxes and penalties to the U.S. government from UBS, Switzerland’s largest bank.

Consequently, Birkenfeld, who is facing 40 months in the federal pen, may now leave prison with millions of dollars in reward money.

The IRS is changing its attitude towards Whistleblowers–ten years ago, anyone who had enough knowledge of a company’s accounting books were not eligible for reaping any reward money for being the whistleblower because they were inevitably involved in crafting the tax evasion activities. Now, these same people who may have faced prison sentences for their crimes may be entitled to received a reduced reward amount (which could still be very substantial, depending on the case and how much back taxes owed).

This whistleblower rewards program has motivated many more people to rat out the “bigger guys.” From 2004-2005, the IRS was mostly dealing with small cases of tax evasion. But according to Forbes, “in fiscal 2009, ended Oct. 30, the IRS Whistleblower Office also logged big case leads on 1,900 taxpayers, up from 1,246 in fiscal 2008, the first full year the new law was in effect. Dozens of these tips involve purported tax losses of $100 million or more.”

In many of these instances, the whistleblower could walk away from it with anywhere between 15% to 30% of the back taxes owed by some of these corporations–amounting to rewards of millions of dollars.

The important thing to learn from this development is that the only way to ensure that no one will hand you on a silver platter to the IRS is if you do not commit any tax fraud. The rewards are high for whistleblowers and who’s to resist the temptation of a large payoff in this economic slump?

Get your accounting number straight. Make sure that your tax numbers are legitimate and correct. If you have someone else do your accounting for you, make sure to verify the accuracy of the numbers you submit to the IRS. Once you sign off on your tax forms, you are technically liable for what you have “approved” on it. Don’t risk being accused of being a tax cheat–hold your accountants accountable.

Also check out this great cartoon we posted last month on the whistleblower program.

Read the full Forbes article on IRS whistleblowers.

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More Tax Help, IRS News and Tax Relief Tips:

1. Tax Help News: IRS Enforcement to Get Priority, Big Bucks in 2010
2. Tax Help News: 13% of Americans Find Tax Evasion Acceptable as IRS Audits Increase
3. IRS Tax Help From Tax Expert: What Individuals and Businesses Need to Know to Avoid Tax Problems
4. Tax Resolution News: IRS Warns Against Frivolous Tax Arguments That Can Incur Severe Penalties
5. Tax Help: How to Resolve Your Back Taxes & Prevent Tax Problems If You’re Short on Cash This Season

Tags: Back Taxes, Forbes article whistleblower, IRS debt, IRS whistleblower reward, tax attorney, tax cheats, tax evaders, tax evasion, tax fraud, tax help, tax relief, tax resolution, UBS AG, whistleblower money

This entry was posted on Thursday, December 3rd, 2009 at 1:43 pm and is filed under Back Taxes, Offshore Tax Settlements, tax help. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.