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The money is taxable income and should be reported. If it is over $600 they must receive a W-2 and the payor reports it to the IRS. Large amounts paid as part of a TIPS program or such may even be subject to having withholding taken (similar to winning at a casino).

If some bumb on the street who gets $50 for for giving up info actually reports it on a return, lord knows.

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Q: Do police informants pay income tax on money received for information given?
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