Should You Report Your Ex To The IRS Like The TikTok Trends Say?

Forbes

Kelly Phillips Erb, a senior writer for Forbes, joins ‘Forbes Talks’ to discuss IRS whistleblower laws after a TikTok video went viral about reporting your ex to the IRS.  0:00 Introduction 0:30 A Story Gone Viral, Can You Report People To The IRS? 1:07 IRS Whistleblowers 4:06 The Success Rate Of Whistleblowers, Is It Worth It? 6:38 Substantial Rewards And Tax Evasion 8:15 Bogus vs Real Claims 10:46 Advice On Reporting Tax Evasion/Reporting  Read more on Forbes: https://www.forbes.com/sites/kellyphillipserb/2024/01/02/why-tiktok-advice-to-report-your-ex-to-the-irs-doesnt-always-add-up/?sh=1113dda149bb  Subscribe to FORBES: https://www.youtube.com/user/Forbes?sub_confirmation=1  Fuel your success with Forbes. Gain unlimited access to premium journalism, including breaking news, groundbreaking in-depth reported stories, daily digests and more. Plus, members get a front-row seat at members-only events with leading thinkers and doers, access to premium video that can help you get ahead, an ad-light experience, early access to select products including NFT drops and more:  https://account.forbes.com/membership/?utm_source=youtube&utm_medium=display&utm_campaign=growth_non-sub_paid_subscribe_ytdescript  Stay Connected Forbes newsletters: https://newsletters.editorial.forbes.com Forbes on Facebook: http://fb.com/forbes Forbes Video on Twitter: http://www.twitter.com/forbes Forbes Video on Instagram: http://instagram.com/forbes More From Forbes:  http://forbes.com  Forbes covers the intersection of entrepreneurship, wealth, technology, business and lifestyle with a focus on people and success.

Transcript

00:00 Hi, everyone. I'm Rosemary Miller here with Kelly Phillips Erb, a senior writer here at

00:08 Forbes, here to tell us why the TikTok advice to report your ex to the IRS doesn't always

00:15 add up. Thank you so much for joining me today, Kelly.

00:19 Thank you for having me.

00:20 So Kelly, what prompted your interest in investigating and debunking a TikTok influencers claim about

00:26 making money by reporting an ex to the IRS?

00:30 So I started getting a lot of things on my feed, people asking me, is it true that you

00:38 can, you know, turn your ex into the IRS and get money? And I knew it had to come from

00:45 somewhere. So I did a little, little, little research and saw that there was a clip of

00:52 someone on TikTok making that claim. And there had been thousands of comments and millions

00:58 of views. So clearly, people had a lot of interest in whether or not this was true.

01:04 And so that's that's kind of what inspired the article.

01:07 Okay. And can you can you elaborate on the criteria set by the IRS for whistleblowers

01:13 to qualify for rewards, especially in cases related to tax evasion?

01:17 Right. So I think that people have this idea that, you know, somebody that cheated, you

01:24 could just turn them in, right? Like like you're mad at your ex in this case. Why not

01:30 flip them? Because there's a whistleblower policy that really does exist with the IRS

01:35 where you can actually get a piece of the tax that they collect. But as you mentioned,

01:41 there are criteria. They're not looking to figure out, you know, the hundred dollar deduction

01:45 that he claimed that he wasn't entitled to. They're looking for big dollars. So typically,

01:50 we're looking at incomes of at least for individual taxpayers of at least two hundred thousand

01:55 dollars. So we're setting the bar pretty high there. And they're looking for fraud. They're

02:00 basically looking for fraud in the millions. Right. So you're looking at two hundred thousand

02:04 as your threshold income. And then the the alleged the alleged tax fraud tends to be

02:12 in the millions, two million is the mark that's in the statute. There's a little bit of wiggle

02:17 there, but that's basically what they're looking for, because there's another discretionary

02:20 program. But that's the one that that people kind of point their finger at. And you can

02:24 get a percentage of the IRS cuts.

02:28 How is the landscape of whistleblower laws, particularly Section 7623B, evolved over the

02:34 years? And what impact have these changes had on the effectiveness of the program?

02:39 Well, so I think IRS or Congress, of course, writes laws. So I think early on, Congress

02:45 had this idea that if IRS had some help from the public, right, finger pointing that they

02:50 could then go after and it would be an easier, an easier catch for IRS. And there was some

02:56 truth to that. But as the program continued, they started narrowing what they were accepting.

03:02 They're looking at they also changed the rules on how much you could collect. So now the

03:07 caps are typically around 15 percent. So they've changed over the years. I think, you know,

03:13 widely related to how well IRS does collecting. IRS has to submit a report every year that

03:19 says here's what we are investigating. Here's how much we collected. And, you know, here's

03:24 what we hope to collect in the future. So when Congress has seen that they have made

03:29 some tweaks to the law, but overall, you know, the law still is pretty much the same, which

03:34 is that you have to give real information. So you can't just say, I think my guy is cheating.

03:39 Right. You have to say, I know his business hasn't paid payroll taxes in three years.

03:45 Right. And here's how much it was. And you have to give the IRS enough information to

03:49 where they can actually investigate and collect. That's the other part that I think sometimes

03:54 gets missing in these discussions, because if you're arguing your you know, your ex is

03:59 a deadbeat, he doesn't have any money. Well, how's he going to pay the IRS to write because

04:03 you only get paid if IRS gets paid? Okay. And could you explain the actual success rates

04:09 and average claim processing time for whistleblowers? So, you know, the program, it's funny that

04:15 we just referenced that the statute's actually been around a while, but the Office of the

04:21 whistleblower hasn't been around for that many, many years, I think it's been around

04:25 a decade and a half or so. And, and they've been, you know, the claims processes have

04:30 changed a little bit their success, I think, of course, they go back and they look at the

04:33 see how's how are we doing? They make some tweaks. But it does take time, you're not

04:39 you're not turning somebody in and getting paid tomorrow. Anybody who's ever been on

04:43 hold with IRS knows that it takes a long time to get your own questions answered. And so

04:48 you don't get paid until IRS gets paid, which means you have to turn over advice. Usually

04:53 you can, there's a form, you can also call the IRS. So there's the IRS has a whistleblower

05:00 page on their website. So you can go to IRS.gov, just type in whistleblower, and it'll give

05:04 you the information that you need. And again, they're looking for big dollars. But once

05:09 they have that information, they start looking around, see if your claims worth investigating,

05:15 see if that information could have been made public somewhere else. So for example, if

05:21 I wanted to turn in Hunter Biden, or you know, one of the computer chase from Real Housewives,

05:28 if that information has already been made public, then I'm not really the whistleblower,

05:33 right? I'm just reporting on something that they already knew, because the IRS wants information

05:37 that they aren't getting from somewhere else. So the person can't be under investigation already,

05:41 this has to be new information, you turn over what you know, and then the IRS looks into it.

05:47 And then they start working if it makes sense for them to follow up. If it does, you should expect

05:52 this to take some time. As a tax attorney, I can tell you that it is rare that you see anything

05:57 happen within the first two years with collections matters, especially the IRS's, even if they're

06:03 being particularly aggressive. So I think this notion, again, on TikTok, we like to hear something

06:09 and have an immediate reaction, right? So if somebody says, hey, you know, I, you know, I can

06:14 turn my ex in and get paid and I get paid 100,000 or whatever the number was, she said she got paid.

06:20 That's a lot of money, first of all, so the fraud was pretty big. And then second of all,

06:26 the IRS would have had to go through all that process that we just discussed.

06:29 That isn't likely to happen in a few weeks, you're looking at a few years. And, and again,

06:35 some of these go on for even longer. So how common is it for individuals to receive

06:40 such substantial rewards like $100,000 for tax evasion? So there's some big numbers,

06:47 if you go and look at the IRS actually does publish, as I mentioned, the annual reports,

06:50 you can actually go and look, there's some big numbers. But most of the time, those numbers are

06:54 not coming again, from individual, smaller payments, they tend to come from corporate fraud,

07:00 big international fraud, offshore, like things that you're that are gonna, again, that are worth

07:07 the IRS's time and resources to follow things like, you know, W-2s matching that they could

07:14 have easily found out on their own that you're not going to be looking at that. And even if they are,

07:18 even if your, your ex committed $200,000 worth of fraud, let's assume the IRS decided that that

07:25 met the criteria, and they're taking that case, you know, at the end of the day, maybe you walk

07:29 away with 30. If you look at the amount of money that the 30,000, but if you look at the amount of

07:34 money that the whistleblower program has paid out, and the number of cases they've actually worked,

07:40 you'll see it's not a lot of those like $30,000 pieces, it's millions of dollars. And, and some

07:46 of it has been very, very prominent, there have been especially some accusations against there

07:51 was a big accusation against a public company a while ago, and it was an insider whistleblower

07:56 who made that claim. So again, it tends to be, you know, sometimes people who are disgruntled,

08:02 so maybe employees or exes, but it needs to be somebody with some actual information. And the

08:08 target needs to be somebody that actually has money. So, you know, there's a lot of factors,

08:13 a lot of parts. Well, in your article, you mentioned that the purpose of the program was

08:19 to encourage compliance and not to seek revenge, like what's going on on Tick Tock, can you discuss

08:24 the potential consequences of making a false or bogus claim to the IRS? Right? So, so the whole

08:30 idea is that with the client side is that if you, if you, you know, IRS is very, very clear that

08:37 they want you to pay their tax, your taxes. And they're also very clear about the fact that most

08:41 Americans do. If you look at the tax gap, you look at the tax stats, most Americans pay their

08:46 bills in full and on time to the, to the IRS. That's a fact. But our system is voluntary. And

08:53 by voluntary, I don't mean like you don't have to pay your taxes, but I mean, it's not like some

08:57 other countries where they're figuring it for you and pointing a finger and saying, you must pay

09:00 your taxes. What happens in the, in the US is that we file our return. We report our income. We,

09:07 we self report deductions, right? And then we pay our tax. The IRS is hopeful that when you know

09:14 there are penalties for not complying, that you're going to fill that return out correctly when you

09:19 submit it. So that's what I mean by voluntary. But when that doesn't happen, you know, there,

09:26 if there's a balance due or if there's some kind of evasion, then that's when they go after you in

09:30 terms of collections. So what I think is interesting, what you have to keep in mind from

09:35 the, what this TikTok person, influencer was saying, is I think you have to be very, very sure

09:42 that the claims that you're making are substantiated. It can't be, I think my neighbor's

09:47 cheating because they have a fancy car and I'm sure that they don't make that much money, right?

09:51 Like it has to be real information that you have and to make sure that they don't get an influx of

09:56 bogus claims, people calling to report those little things. There are penalties for, for

10:02 reporting the wrong thing, especially if it's malicious, for example. And that's where,

10:08 when we talk about your ex, you have to be really wary, right? Like you can't just call up the IRS

10:12 and say, I know they cheated and here's some information and make up things. The IRS wants

10:17 you to turn over legitimate information that can be used to collect back taxes. It's not intended

10:23 to be a source of revenge. Like, and as I alluded to in the article, you know, the revenge part

10:28 might be fun for you. If it works out that way, right? Like, you know, you might have some kind of

10:33 that, you know, sense of, well, I got them, right? But at the end of the day, that's not the intent

10:39 of the whistleblower statute. The intention is to help IRS collect money that was genuinely payable.

10:45 So considering the complexity of the IRS whistleblower program, what advice would you

10:51 give to someone who genuinely believes they have information about tax evasion and is contemplating

10:57 reporting it to the IRS? A hundred percent use a professional. And there's a lot of reasons for

11:03 that. One is because they can help you walk, they can help walk you through the process

11:07 so that you make sure that A, you met the criteria, B, you're reporting it correctly,

11:13 and C, that you're not going to get yourself into trouble because it can't tell you how many times

11:17 as an attorney, I've had people call and say they want to report their ex, meaning not their ex

11:22 boyfriend, but maybe an ex spouse or an ex business partner. And it turns out that they

11:28 were involved in the years that they want to turn the ex in for, you know, then, then scrutiny comes

11:34 back on you, right? So if I want to say my husband and I didn't pay taxes last year, now let's go get

11:40 my husband. The IRS is going to say, wait a minute, but you and your husband, right? So you want to

11:44 make sure that you're not throwing yourself under the bus at the same time when you make a report.

11:49 So 100%, I would say that you'd want to connect with the tax professional, discuss the potential

11:55 consequences, and whether or not the reward is likely and worth it.

12:00 Well, thank you so much for joining me today, Kelly.

12:03 Thank you.

12:04 Bye.

12:05 Bye.

12:13 [BLANK_AUDIO]

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