Tips on tax cheats skyrocket with bigger rewards

The IRS has implemented a law that allows tipsters to report companies and individuals who they believe are cheating their taxes. The law allows the qualified whistleblower to receive between 15 to 30 percent of the amount the IRS collects. The IRS believes that having a cash incentive will cause more people to report tax evaders. The IRS has enacted a similar law in late 2006.

When the law first started in 2006, the law targeted any company that owed at least $2 million in unpaid taxes, interest, and penalties. The law also targeted any individual with an income of at least $200,000. Today, these are the same qualifications for the whistleblowers to receive their reward.

In 2008, the agency reported receiving 1,246 tips on suspected tax dodgers, each owing more than $2 million. That's up from 116 big-money tips in 2007. A recent report has shown that among the tips received in 2008 included 228 accuse suspected tax dodgers of owing more than $10 million and 64 accuse suspected tax dodgers of owing more than $100 million.

The law states that the informants are promised confidentiality, unless they are required to testify in court. Keep in mind that whistleblowers themselves are not immune from prosecution if they take part in tax scams.

Officials however still do not know how well the tips will pan out. Once a tip is given, there is still a long process of audits and appeals. Many lawmakers have shown support of the law but criticize the pace of the program. The IRS claims that rewards will only be paid once all the taxes, penalties, and interest are collected. Whistleblowers may have to wait a long time for any rewards, possibility several years. Today, no one has been paid under this new law.

However, if you decide to submit information and seek an award you can do so by filling out the IRS Form 211.

Are Lenders Discriminating?

The government reported on Wednesday, October 1, 2009, that nearly one out of every three loan applications for a mortgage was denied last year. This is partly due to massive changes in the lending industry as a result of the housing market bust. However, what is interesting is that the denial rates for African Americans and Hispanics were nearly twice as much as the white borrower.

Recent records have shown that blacks and Hispanics are borrowing more from FHA-insured loans. This just illustrates that these race groups cannot borrow from any of the private sectors and must look for other available options. Borrowing from a FHA-insured loan means that these two race groups will likely experience high-priced loans. Last year, about 17 percent of blacks and 15 percent of Hispanics got high-priced loans, compared with about 7 percent of whites.

However, the mortgage industry claims that lenders are not being discriminated by race. The industry insists that it is due to the borrower’s credit scores and the size of their down payments. This may be true but the disappearance of “piggyback” mortgages has played a huge role in the lending problem. The “piggyback” mortgage allows borrowers to use a second mortgage to avoid making a 20 percent down payment. Today, they are non-existent. Only 98,000 were made last year, down from 1.3 million annually in 2006. Without these “piggyback” mortgages and with our unstable economy, every race is finding it more difficult to finance their mortgages. It just so happens that blacks and Hispanics are suffering the worst.

To E-file or not to E-file?

With the growing trend of emails, online banking, and everyone having access to a computer, the Internal Revenue Service (IRS) is encouraging taxpayers to e-file their taxes. Last year over 90 million people used e-file to do their taxes.

From the onset, there seems to be numerous advantages to e-filing. Some of the advantages include:
• a faster refund than using a tradition paper return (as quick as 10 days if you use direct deposit);
• electronic returns have fewer errors than the paper returns;
• you can file your taxes any hour of the day or night; and
• most importantly—you save paper.
As everyone knows or should know, the deadline to e-file a tax return or to e-file a tax extension is April 15. If you e-file a tax extension before April 15, then you are entitled to a tax extension deadline of October 15 for your tax returns. However, after October 15, you can prepare your tax return on efile.com but you must mail in your tax return. Therefore, October 15 is the last day to take advantage of e-file or the “Free File” program.
The “Free File” program is a fast, easy, and free way to prepare and e-file federal taxes online. The “Free File” program provides free federal income tax preparation and electronic filing for eligible taxpayers through a partnership between the IRS and the Free File Alliance LLC, a group of private sector tax software companies.
Two free filing tax preparation and e-filing programs are available to individual taxpayers. “Traditional Free File” is available for taxpayers with adjusted gross incomes of $56,000 or less. On the other hand, “Free File Fillable Forms” can be used by people who earned more than $56,000.