Want to Make Money? Snitch on Your Tax-Cheating Neighbor
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Here's your Money Briefing. I'm J.R. Whelan at The Wall Street Journal in New York. What if you knew somebody or a company was cheating on their taxes? The IRS would want to hear your story, and they might pay you big bucks for tipping them off. We'll discuss in a moment. First, these money and market stories you should know. Consumer outlook for the U.S. economy has been historically high for the past two and a half years, though it pulled back a bit in April.
What is the IRS whistleblower program and why is it in the news?
Still, the confidence is at the highest level since the economic expansion during the late stages of the Clinton administration. Economists are optimistic that the report from the Commerce Department could mean an uptick in consumer spending in the months ahead, after the disappointing 1.2 percent annual rate in the first quarter. And homeownership in the U.S. fell for the first time in more than two years in the first quarter. That's the word from the Census Bureau. It fell to 64.2%. After more than a decade of declines, the homeownership rate has been steadily climbing since the beginning of 2017 and was nearing its historic average of about 65%. Average mortgage rates for a 30-year loan have fallen from nearly 5% in the fall to just over 4% today.
That hasn't caught up to the home-buying... But that hasn't caught up to home buying yet to bring an uptick. And even though the rate dipped last quarter, homeownership has risen overall recently as a result of younger households successfully making the transition from renting to owning, which for many families is critical to saving for retirement and other big expenses.
We're told at an early age that nobody likes a tattle. But what if tattling could line your pockets legally? Well, that would be a different story. Turns out tattling or snitching on your tax-cheating neighbor could mean big bucks for you. And Wall Street Journal tax reporter Laura Saunders is here with details. So first of all, Laura, I'm all paid up.
Good, good. I won't turn you in.
But seriously, the IRS takes this very seriously. In fact, it's paid out hundreds of millions of dollars to tipsters.
Well, that's right. It takes it very seriously because Congress has told it to take it very seriously. Senator Grassley was behind an expansion of a whistleblower program in 2006 that is really taking hold, and it pays up to 30 percent to whistleblowers who turn in tax cheats to where the tax sheet is underpaying by $2 million or more. So these are big, serious cases. This is not just your neighbor who has no job but has a shiny Mercedes in the driveway.
And these are individuals on up to big corporations that have been turned in.
It could be individuals, corporations, banks, offshore. Offshore is a very big growth area. Yeah, that's right.
And there may be some in our audience thinking about who they could turn in and report to the IRS, but the IRS doesn't take on every tip that comes its way.
No, that's right. And let's just back up for a second. Let's talk about how big this really is right now. A few years ago, they paid out maybe tens of millions of dollars in rewards. Last year, they paid out $317 million in rewards, which was like a tenfold from the year before. And that saved about... $1.4 billion that brought in that much in tax. And also, of the $300 million paid out last year, $100 million of it was to one person.
Oh, is that right? Yes. So somebody cashed in.
Yes, yes. But they probably had to go to a lot of trouble to do it.
Can people remain anonymous who do this?
You're not anonymous to the IRS, but yes, you are anonymous to the world. And the IRS is very good at keeping secrets.
And so the IRS was handling or was made aware of 29,000 tips in 2018, and they didn't process all those tips.
Yes, they have. Well, it wasn't that the 29,000 number is what's open claims from all years. But it is true that they reject about three-quarters of claims when they hit the door. You know, they're not the right amount or they're not for the right thing or whatever. They're very stringent. So we only had, I guess, about 200 awards last year.
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