Taxes: Payoff for Informers

For tips that helped the Internal Revenue Service recover $18.1 million last year, 822 “tax tattlers” earned rewards totaling $565,254. Although payments to tipsters hit an average of $687, reported Commerce Clearing House last week, hardly anyone knows the range of their rewards—except the IRS, of course, which taxes the payoffs. The tax code sets the “normal” payoff as 10% of whatever money informers bring in, but district tax collectors can pay whatever a tip is worth. Moreover, “no unauthorized person shall be advised of the identity of the informant”—a provision which protected the 3,672 informers whose information proved to be worthless last year. Wrongly accused tax evaders have only one recourse: if he succeeds in uncovering the name of the erring tattler, the taxpayer may have a claim for defamation.