Reporting Suspected Tax Fraud: Consequences and Rewards

Tax fraud, a serious offense that undermines the integrity of the tax system, can take various forms, including false exemptions, unreported income, and organized crime. Individuals who suspect tax fraud can play a vital role in combating this illicit activity by reporting their concerns to the Internal Revenue Service (IRS).

Consequences of Reporting Tax Fraud

While reporting suspected tax fraud is a civic duty, it’s essential to understand the potential consequences of doing so. The IRS maintains strict confidentiality regarding whistleblower identities, but individuals may still face retaliation from the accused party.

To protect whistleblowers from retaliation, the IRS has implemented the Taxpayer First Act, which prohibits employers from retaliating against employees who report suspected tax fraud. This protection extends to both current and former employees.

Rewards for Reporting Tax Fraud

In addition to the moral obligation to report tax fraud, the IRS offers monetary rewards to eligible individuals who provide information that leads to the successful prosecution of tax fraud cases. The award amount typically ranges from 15% to 30% of the proceeds collected and attributable to the whistleblower’s information.

Eligibility for Whistleblower Awards

Not all individuals are eligible to receive whistleblower awards. The following individuals are ineligible:

  • Current or former employees of the Department of Treasury
  • Individuals who obtained the information through their official duties as government employees
  • Individuals who are required by law to disclose the information
  • Individuals who obtained the information through a contract with the federal government
  • Individuals who filed a claim based on information obtained from an ineligible whistleblower

How to Report Suspected Tax Fraud

Individuals can report suspected tax fraud online using Form 3949-A, Information Referral. Alternatively, they can mail the completed form to the IRS. The IRS emphasizes that tax fraud reports should not be made over the phone.

Types of Tax Fraud

Tax fraud encompasses a wide range of offenses, including:

  • False exemptions or deductions
  • Kickbacks
  • False or altered documents
  • Failure to pay tax
  • Unreported income
  • Organized crime
  • Failure to withhold
  • Failure to follow tax laws

Additional Reporting Options

In addition to reporting suspected tax fraud to the IRS, individuals can also report:

  • Suspected Abusive Tax Promotions or Preparers using Form 14242
  • Fraudulent activity or abusive tax schemes by tax return preparers using Form 14157
  • Misconduct or wrongdoing by an exempt organization or employee plan using Form 13909

Reporting suspected tax fraud is a crucial step in upholding the integrity of the tax system. The IRS provides various avenues for individuals to report their concerns, including online and mail-in options. While retaliation is a potential concern, the IRS has implemented measures to protect whistleblowers. Monetary rewards are also available to eligible individuals who provide information that leads to the successful prosecution of tax fraud cases.

Former IRS Agent Explains How To Turn Someone r Report Them to the IRS and Have IRS Work The Case.

FAQ

Will someone know if you report them to the IRS?

We will keep your identity confidential when you file a tax fraud report. You won’t receive a status or progress update due to tax return confidentiality under IRC 6103. Tax fraud includes: False exemptions or deductions.

How much do you get if you report someone to the IRS?

An award worth between 15 and 30 percent of the total proceeds that IRS collects could be paid, if the IRS moves ahead based on the information provided. Under the law, these awards will be paid when the amount identified by the whistleblower (including taxes, penalties and interest) is more than $2 million.

How long does it take for the IRS to investigate someone?

While every case is different, here is a typical timeline from start to finish: 0-6 months – IRS conducts initial audit and review. 6-12 months – IRS conducts formal criminal investigation. 1-3 months – IRS Chief Counsel reviews findings.

When you report someone to the IRS is it anonymous?

You can remain anonymous. The IRS sets professional standards for attorneys, certified public accountants and enrolled agents who represent taxpayers before the IRS.

What happens if you report someone to the IRS?

Reporting someone to the Internal Revenue Service for alleged tax fraud under the confidentiality of the Whistleblower Program can lead to a whistleblower award of 15 to 30% of the proceeds. Here are the instructions on how to safely report someone to the IRS: 1. Hire A Whistleblower Attorney

Should you report tax fraud to the IRS?

But honest taxpayers can help the IRS narrow the tax gap. If you suspect that an individual or business has been committing tax fraud, you can report it to the IRS. Doing so can help the IRS enforce tax laws. And you may even be eligible for a cash reward in some cases.

How do I report someone to the IRS?

Reporting someone to the IRS means you want to be a whistleblower. There are three general steps to successfully and anonymously reporting tax fraud, this includes (1) hiring an attorney (2) gathering evidence, and (3) submitting a formal claim (IRS Form 211).

Should you report a tax case to the IRS?

If you have valid forms of evidence that prove an individual or business to the IRS has violated tax laws in some way, reporting the case to the IRS helps the United States government with the collection of taxes that are rightfully owed, as well as potentially earn you a reward for “blowing the whistle.”

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