Do you hate tax cheats enough to turn them in? In your own company? Would it matter if you received a portion of the IRS’ recovery as a reward?

Recently, we discussed Payroll ethics and whether you’d break any ethical rules if you revealed someone’s tax information. We touched briefly on letting the IRS know about tax irregularities at your employer.

The IRS’ Closer Look project recently covered tax whistleblowing, so it’s right we take another look at it.

Whistleblowing is all the rage

According to the IRS’ fiscal year 2021 annual whistleblower report, three of the 10 most common allegations that prompted whistleblowing involved payroll issues:

• Classifying workers as employees or independent contractors
• Underreporting wages
• Paying wages in cash or under the table.

As of Sept. 30, 2021 (the end of the federal government’s fiscal year), the IRS Whistleblower Office successfully collected $6.39 billion from non-compliant taxpayers and paid out more than 2,500 awards to whistleblowers, totaling more than $1.05 billion.

Blowing the whistle

The Whistleblower Office is authorized to pay monetary awards in proportion to the value of the information provided. Awards could turn out to be substantial. (Yes, your portion of any award is taxable.)

To be eligible for an award, the tax, penalties, interest, additions to tax, and additional amounts in dispute must exceed an aggregate of $2 million for businesses. Further, the facts, evidence, and other documents you provide must...

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