Joe Bruno on the Mob – “Rat Thy Neighbor” Goes Mainstream

When I first read the article in the Wall Street Journal, that is referenced in the article below, I couldn’t believe what I was reading.

The IRS has created a whole new cottage industry based on the ability and willingness to rat out your neighbor. They call it the “IRS’ Whistleblower Program.” If you provide the IRS with information that shows you neighbor has been cheating on his taxes, or is not reporting all his income, you will get a 10-30% finders fee, based on the money the IRS recovers from your “neighbor.” And apparently, over 10,000 people (rats) have done just that.

Growing up in the streets of New York City, being a “rat” was one of the worst things you could possibly be. Child molesters, and rapists were lower than rats, but that’s about it (There might be more, but right now I can’t think of any).

Now the IRS is making it fashionable, and even profitable, to blow the whistle on your buddy.

Makes me sick to even think about it.

The link to the article below is:

“Rat Thy Neighbor” Goes Mainstream

by Brian Mahany

The headline on the front page of the Weekend Investor section of today’s Wall Street Journal reads “Should You Blow the Whistle on Your Neighbor?” And apparently over 10,000 people have done just that according to the IRS.

Turning in tax cheats in the hopes of getting a cash reward is nothing new. The present program can trace its roots back to 1867, a time that long predates the income tax. Although the program has been around for decades, it was pretty dormant until Congress in2006 increased the amount of payouts that can be received by claimants – up to 30% of the amount of unreported tax that is ultimately collected.

The IRS’ whistleblower program, recently adopted in concept by the SEC, has spawned a new cottage industry. People looking to cash in on those that try to cheat Uncle Sam. While deliberate tax cheats are not well liked – after all, most of us pay our fair share of taxes and hate to think that others are not – many whistleblower cases involve simply different interpretations of tax law or honest mistakes.

As a criminal tax attorney, I have yet to cross examine and IRS agent yet who can claim to have read the entire Internal Revenue Code. If the people paid to enforce the tax laws haven’t even read it, how can we possibly be held to a high standard of knowing every section and every regulation? The regulations alone are numbered in the tens of thousands of pages.

The current program encourages people to turn in their boss or neighbor. In my experience, disgruntled employees, jilted lovers and competitors have all jumped on the band wagon. Anyone looking to make a buck or with an axe to grind stands to gain if their information is accurate and the IRS likes the case.

What does this mean for businesses and individuals? Make sure your financial house is in order. It probably pays to have professional help with your tax planning too. Lawyers and CPA’s have ethical rules that generally prevent them from throwing their clients under the bus. That means they can’t collect a reward for turning in their clients. Financial planners and “mom & pop” tax preparers are generally not bound by the same stringent ethical rules.

If you have an unreported offshore account, have a welfare benefit plan that is on shaky ground or simply have two sets of books, it might be better to come forward with a voluntary disclosure than wait to get caught. With so many potential whistleblowers out there, it’s probably a good time to come clean.

Voluntary compliance almost always avoids criminal prosecution and can be the basis for a reduction of penalties. Waiting until you are caught makes the case more difficult to defend.

If you have a tax problem and don’t know how to come into compliance, call us. All calls are confidential. We have helped people across the U.S. and the world resolve their tax compliance problems, quietly and effectively. For more information, contact attorney Brian Mahany at (414) 704-6731 (direct) or by email at


2 Responses to “Joe Bruno on the Mob – “Rat Thy Neighbor” Goes Mainstream”

  1. Thanks for the shout out!

    While I don’t condone criminal behavior, I also don’t like a society in which everyone is encouraged to spy on their neighbors or throw their employer under the bus.

    Is there any loyalty left in this world?

    Brian Mahany

  2. Right Brian. There is very little loyalty except to the almighty dollar.

    Or to the concept of ratting out whomever necessary to stay out of jail.

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