IRS Tipping Payouts

Business is good right now for anybody willing to turn tax cheats in to the IRS. Last year, the Service awarded more than $312 million to tipsters, according to a report released in February. This is exponentially greater than the then-record year of $125 million in 2012. Why? Because the 2018 tax collection results from whistleblowers was revenue of $1.4 billion, compared to $191 million netted from the same efforts in 2017. Last year, one tipster was awarded $100 million for turning in a multi-national corporation.

2019 is not looking to slow down, either. So far this year, the Service has paid out $115 million to whistleblowers.

This surge in payouts reveals that the expansion of the IRS’s whistleblower program is gaining traction. The change was approved by Congress in 2006 and allows the IRS to pay up to 30% of the revenue collected to the tipster. The large percentage is usually applied in cases of over $2 million, while smaller percentages are applied in smaller cases.

Last year, the IRS paid out only 186 small-program awards totaling about $12 million, an average of $64,500 per payout. The larger cases received payouts of $300 million on 91 cases (up from just 15 cases in 2015).

Notably, the whistleblower need not be an employee or in any significant way connected to the taxpayer they are turning in. A tip may be as simple as a neighbor turning in someone they notice with a new car or lavish vacations, but no employment.

It is also important to note that the whistleblower does not have to be completely clean, either. While helpful, the law doesn’t prohibit them from receiving a benefit unless they were architects of the cheating. The most notorious example of this was Bradley Birkenfeld, who blew the whistle on UBS and received a $104 million payout after serving his term of 30 months in prison for his role in the scheme.

However, as simple as qualifying may seem, there remains the hurdle that the IRS rejects about 75% of claims right away. This can be for a lack of supporting evidence, plausible alternate explanations, or simple the size and effort required to pursue the tip.

Another caution for any would-be tipsters: a payout can take a very long time. The February report states that payouts take at least seven years, while five years is considered “fast.”

Most whistleblowers seeking awards us specialized tax attorneys to prepare their submissions. Those attorneys may charge an up-front retainer or up to 40% of the resulting payout to the tipster. Using an attorney can ensure that the tip and materials are packaged in a manner that is more likely for the IRS to pursue the case. The packaging can include account statements or other evidence that the attorney knows the IRS would want to see.

And of course, those who receive these payouts … must pay income tax!

Communication in the Work Place

Communication is the core to a productive and successful work environment.  Communicating is vital between co-workers; it prevents misunderstandings and conflict and creates a healthy ,peaceful environment. Communication gives you the tools to understand your co-workers and their needs to build a successful business.  It is also vital for client relations.  It is very important to communicate with clients, to understand their needs, and to resolve conflict.  Presenting new information and discussing with clients different options can be the difference between a satisfied client and an unhappy one. Good communication will keep everyone connected to the mission and vision of the projects for a successful future for the business. 

Are you Ready for Retirement?

When Social Security was created, it was meant to supplement a person’s other retirement savings.  Too many Americans today, however, do not have other retirement savings and do depend on Social Security as their only income in retirement.  Many of those who had retirement savings were forced to tap into those accounts during the recession in the early 2000s and have not been able to rebuild their retirement accounts.  It’s not too late; take steps now to save something for your retirement.  There are a number of options available for retirement savings.  For those whose employers offer a 401(k) or similar program at work, participation in those programs offer great tax advantages.  There are traditional Individual Retirement Accounts (IRA) that offer tax savings now or Roth IRAs which offer tax savings later.  If you own your own business there additional opportunities and programs available to you.  Depending on your income level, you may even qualify for a small tax credit called the “Savings Credit”.

Estate Planning For The Single Parent

You might be thinking why would I need an Estate Plan if I'm a single parent, aren't they just for couples?  No, they are not just for couples.  An Estate Plan can help single parents.  Since Nevada does not use the Uniform Probate Code the procedures are not considered streamlined.  Having an Estate Plan can cover your children in a way that you want them to be covered.  It can direct the actions you want to take because it is specific to your needs and wants.

Having an Estate Plan will ensure that you, as a single parent, are looking out for your children even after you are gone.  Your assets can be given out in the way that you would want them to be and your children can be taken care of the way you desire.

It's hard to think about the future, especially when you are a single parent.  Take the time to plan ahead.  Schedule a time to come in and discuss your Estate Plan.

Happy Easter!

Tax season

Federal Tax Return

Keeping your Federal tax return after being prepared can be complicated. The rule is a minimum of three years.  However if you deal in stocks and bonds or Real Estate or Business you should keep them for basis purposes. 

If you are in a dispute with the IRS you should keep your return until the audit or dispute is over.  If you are in a dispute other than with the IRS you should keep your returns as far back as needed (possibly since inception).  If you are going through a divorce I would not shred them,as often your returns are going to be used in the divorce proceedings.