There’s no shortage of drama on Real Housewives of New Jersey (RHONJ) and things are even more heated this season now that Teresa Giudice is back. Giudice was released from federal prison around this time last year after serving nearly a year in prison. Giudice was initially sentenced to 15 months in prison by a federal judge after pleading guilty to four of the counts in a bankruptcy fraud and tax evasion investigation.
Now that Giudice is back, she’s not mincing words. During the Season 7 reunion episode, Giudice accused current RHONJ co-star Jacqueline Laurita and former RHONJ co-star Caroline Manzo of turning her into the feds. Giudice accused Laurita on air, saying. “I plead guilty and you set me up. You set me up. In my gut, it was either you, you and Caroline, set me up. You guys were behind everything, calling the government, everything.”
Laurita denied making the call, remarking, “That is not true.” Giudice, however, stuck to her guns.
Laurita later told Real Mr. Housewife, “The story I’ve heard is that Joe owed his ex-partner a lot of money and he said if Joe (Giudice) didn’t pay him back he would talk to the Feds.” When Joe Giudice wasn’t receptive to a deal, according to Laurita’s interview, “I think that may have pissed off the guy and he may have cooperated with the Feds.”
Neither Teresa Giudice nor Jacqueline Laurita responded to my request for comment.
But if you think that even the thought of this kind of behavior is restricted to reality television, you’d be wrong. “Revenge tax” is more common than you think.
As I noted a couple of years ago, many different kinds of taxpayers contemplate turning someone into state or local authorities – or the Internal Revenue Service (IRS) – as a way of getting back at them. I’ve received a number of emails from taxpayers asking about turning other taxpayers (or alleged tax evaders) into the authorities to exact revenge or correct a perceived injustice.
Sometimes it’s an ex-employee who claims that a former boss was skimming from the register or paying workers in cash.
Sometimes it’s a landlord who would only accept rental payments in cash, so the tenants believe that the rental property was illegal.
Sometimes it’s an ex-boyfriend who is allegedly claiming dependents that aren’t his children.
Sometimes it’s the neighbor who couldn’t possibly have afforded a new sports car on a teacher’s salary.
Whatever the reason, taxpayers often want to become informants to exact their revenge. In addition to a quick hit of satisfaction, sometimes an informant thinks they can benefit, too, as part of a federal whistleblower program.
The IRS Whistleblower Office does pay money to people who successfully report those who fail to pay the tax that they owe. But there are rules (of course). First, you should know that the IRS is onto your plans for revenge. On their website, the IRS warns, “this is not a program for resolving personal problems or disputes about a business relationship.”
Additionally, there are dollar limits. Typically, the IRS Whistleblower Office will pay an award when the amount of tax identified as outstanding by the whistleblower (including taxes, penalties, and interest) is more than $2 million. If the taxpayer is an individual, the taxpayer must also have at least $200,000 in gross income for any taxable year at issue in the claim. That’s not generally the equivalent of skimming a few dollars from the register or failing to report a side job. For most taxpayers, that means that making a complaint about someone else generally won’t result in money in your pocket.
The IRS does have an award program for other whistleblowers who do not meet those dollar thresholds. As you can imagine, the awards are less (a maximum award of 15% up to $10 million) and the awards are discretionary. That’s a big deal especially since an informant isn’t allowed to dispute the outcome of the claim in Tax Court. In other words, if you make a claim under those thresholds, you should be prepared for the idea that you might not walk away with anything.
Of course, the notion of revenge tax isn’t limited to those taxpayers who are telling the truth about tax. It’s not out of the question that in the hurry to make someone else’s life miserable, a taxpayer might pass along a lie or a half-truth. While there might not be consequences to lying about someone’s tax situation over coffee – or a reality television show – there can be real consequences for lying to tax authorities: you can be subject to criminal prosecution and civil actions.
On the federal level, a number of bad behaviors are criminal, including lying under the penalty of perjury or aiding or assisting in a return, affidavit, claim, or other documents that turns out to be false. But a lack of a perjury clause won’t necessarily save you: a false statement doesn’t have to be made under the penalty of perjury to land you in trouble since it’s also against the law to willfully and knowingly deliver or disclose a false or fraudulent document to the IRS.
Similar laws exist at the local and state level. The bottom line? Don’t lie to the tax authorities to get someone in trouble even if you’re really (really) sure that they’re doing something wrong and you think the feds just need a hand. You can land yourself in a lot of trouble.
If you have a legitimate concern about potentially illegal behavior, the IRS does have processes in place for reporting.
- If you want to report an individual or a business for behaviors such as false exemptions or deductions, kickbacks, a false/altered document, failure to pay tax, unreported income, organized crime, and failure to withhold, use form 3949-A, Information Referral (downloads as a pdf).
- If you want to report a nonprofit or employee plan that’s engaging in improper behavior, use form 13909, Tax-Exempt Organization Complaint (Referral) Form (downloads as a pdf).
- If you want to report a bad tax preparer, use form 14157, Complaint: Tax Return Preparer, (downloads as a pdf).
- If you have a legitimate whistleblower claim that meets the criteria for an award, use form 211, Application for Award for Original Information (downloads as a pdf).
- If you are trying to report that your identity has been stolen, use form 14039, Identity Theft Affidavit (downloads as a pdf).
Again, these forms are for legitimate claims. And I mean legitimate claims, not mere suspicions. If you don’t know why your employers have a beach house, don’t assume they’re is cheating the system: they might just have a rich old aunt who died. And your neighbors who suddenly have a Tesla may have simply gotten a good deal. It’s not your job to be the tax patrol: the IRS has a pretty active Criminal Investigations department that’s already chasing the bad guys.
