The Internal Revenue Service promises confidentiality to all who provide it with information about violations of federal tax law and rewards of up to $2,000,000 per tip. Senator Charles Grassley (R-Iowa), Chairman of the Senate Finance Committee, has proposed removing the cap on such rewards, and changing the IRS-administered program in other ways, as a means of combating tax cheating and increasing federal revenues. Illogically, the Wall Street Journal opposed Senator Grassley's proposals. This paper analyzes the demand for information about tax cheating microeconomically, legally and mathematically. It concludes that the IRS is essentially a monopsonist in this market, since almost no one else will pay for such information. This leads to a prediction that the number and quality of tax tips, and the resulting federal revenues, will all be maximized if the IRS refines its current policy of rewarding informants on a sliding scale, rather than offer the minimum 15% reward proposed by Senator Grassley. However, this paper agrees with his proposal to uncap the amount of the reward. Next, this paper analyzes the supply of information about tax cheats. In addition to the overwhelming likelihood that the IRS will not pay an informant for her information, she must consider the potentially huge costs of being exposed as a tax informant. This paper describes those costs of production and proposes that Congress shift some of them to the IRS by: Granting informants, as Senator Grassley proposed, a right of independent, in camera judicial review of IRS reward decisions; and clearly waiving federal immunity to the claims of informants for breach of the IRS's promises of confidentiality. This paper details various federal and state laws, some based on professional rules of conduct, that forbid certain potential tax informants from sharing their information with the IRS, on pain of disbarment from their professions and imprisonment. This paper then proposes a universal standard for such laws and professional rules. The paper also offers suggestions for further research and for legislative and administrative changes that will increase the government's revenues, net of rewards paid, from the program. After concluding, the paper provides an Appendix that describes mathematically the supply and demand functions of the market for federal tax informants.