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How to Report Suspected Tax Evasion: A Guide
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How to Report Suspected Tax Evasion: A Guide
Paying taxes is a civic duty that supports our communities. But some people try to get out of doing their part. Tax evasion cheats the government and taxpayers. It can hurt funding for roads; schools; healthcare and more. So what can you do if you suspect someone isn’t paying their fair share?
What is Tax Evasion?
Tax evasion is illegally not paying taxes owed. It often involves hiding or misreporting income. Common tax evasion tactics include:
- Not reporting cash businesses earnings
- Claiming personal expenses as business expenses
- Hiding money in offshore bank accounts
Tax evasion is a felony. If convicted, penalties can include paying back taxes plus interest and fines. Jail time is also possible.
Why Should You Report Suspected Tax Evasion?
No one wants to snitch on neighbors or rat out friends. But tax evasion hurts communities. The IRS estimates $441 billion in taxes goes unpaid yearly. That’s a lot of money that could go to roads, schools, defense and more. Reporting tax evasion promotes fairness and funds public services. It also helps honest taxpayers who end up paying more to cover others cheating.
How to Report Suspected Tax Evasion
If you suspect someone is evading taxes, you can report it to the IRS. You can choose to identify yourself or stay anonymous. Here’s how:
Call the IRS
Call 800-829-0433 to report suspected tax fraud over the phone. You’ll reach the IRS Criminal Investigation division. They’ll ask you questions about what you observed. Details like dates, who was involved and documents help them investigate. You can choose to give your name or stay anonymous on the call.
Submit Form 3949-A
Fill out Form 3949-A to report tax evasion in writing. On the form list information like who you suspect, their contact info and the facts observed. Print and mail the completed form to:
Internal Revenue Service
Fresno, CA 93888
This also lets you stay anonymous if you prefer. But giving your name can help build a stronger case.
Send an Anonymous Letter
To report tax evasion anonymously, write a letter detailing the suspected fraud. Explain what you observed and who was involved. List any evidence you have and relevant dates. Send the letter to the Fresno address above. Make sure to leave off your name and return address.
File Form 211
If the tax evasion involves more than $2 million in unpaid taxes, file Form 211. This IRS whistleblower form entitles you to 15-30% of recovered money. Hiring a lawyer can help navigate the detailed form. Form 211 requires you to provide your name and contact information.
What Happens After Reporting Tax Evasion?
After getting a tip, the IRS investigates to verify potential tax fraud. They typically audit the person or business suspected of evasion. Auditors inspect financial records to identify unreported income or false deductions. If fraud is confirmed, the IRS pursues back taxes and penalties based on the law.
In some cases, tax evasion rises to criminal levels. Examples include using false Social Security numbers or offshore accounts to hide large amounts of income. Then the case may get forwarded to the IRS Criminal Investigation Unit. They work with federal prosecutors to pursue criminal convictions.
Protect Yourself When Reporting Tax Evasion
The IRS keeps whistleblowers’ identities confidential by law. But reporting someone you know still poses risks like retaliation. Consider the following to protect yourself:
- Report anonymously using Form 3949-A or an anonymous letter if possible
- Don’t tell anyone you filed a report to avoid word getting back
- Save copies of any evidence outside your home in case it disappears
- Talk to a lawyer if you feel unsafe or experience threats
With confidentiality laws, reporting suspected tax fraud is safe for most people. And it promotes much needed fairness in our tax system.
If you observe someone not paying their taxes, say something. Your tip can help fund important community services.