How to Report Someone to the IRS?

The Internal Revenue Service (IRS) relies on honest taxpayers to fund government operations and essential services. When someone cheats on their taxes, it undermines the system and places an unfair burden on the rest of us. If you have reason to believe someone is evading their tax obligations, reporting them to the IRS is the right thing to do.

Types of Tax Fraud

Tax fraud covers a wide array of illegal activities. Here are some of the most common examples, along with real-life scenarios to illustrate them:

1. Underreporting Income: Deliberately leaving income off a tax return to pay less. A business owner only reports income received through official bank accounts, while keeping cash sales off the books.

2. False Deductions or Exemptions: Claiming deductions or exemptions that aren’t legitimate. A taxpayer fabricates medical expenses or charitable contributions to receive a larger tax refund.

3. Hiding Assets: Keeping assets in offshore accounts or under another person’s name to conceal them from the IRS. A celebrity uses a shell company to purchase a luxury vacation home and avoids taxes on the property.

4. Identity Theft: Using someone else’s identity to file a fraudulent tax return for a refund. Criminals steal Social Security numbers and other personal information to file fake tax returns for unemployment benefits.

3. Abusive Tax Schemes: Engaging in illegal tax avoidance strategies, often promoted by unscrupulous tax preparers. A tax advisor suggests a risky investment scheme that promises massive tax deductions but has little chance of success.

How to File a Report with the IRS?

The IRS provides a specific form for reporting suspected tax law violations:

• Form 3949-A, Information Referral: You can submit this form online at the IRS website (https://www.irs.gov/individuals/how-do-you-report-suspected-tax-fraud-activity) or mail it in.

Information to Include

To help the IRS investigate, provide as much of the following information on Form 3949-A:

• Suspect’s details: Name, address, Social Security number (if known), and any business affiliations.
• Type of suspected fraud: Describe the activity you believe is fraudulent.
• How you know about the fraud: Explain your source of information.
• Dollar amounts involved: Estimate the amount of unpaid taxes if possible.
• Any other relevant details: Include anything that seems pertinent to the investigation.

IRS will keep your identity confidential. You will not generally be updated on the status of your report, as tax records are protected by privacy laws.

Other Types of Reporting

The IRS offers additional tools for reporting specific issues:

• Abusive Return Preparers: Use Form 14157 (https://www.irs.gov/individuals/how-do-you-report-suspected-tax-fraud-activity)
• Exempt Organization Wrongdoing: Use Form 13909 (https://www.irs.gov/individuals/how-do-you-report-suspected-tax-fraud-activity)

Note: IRS does not accept tax fraud reports over the phone. The official forms and procedures are designed to protect confidentiality and gather the necessary information.

Tax fraud costs the United States billions of dollars each year. By reporting suspected tax cheats to the IRS, you are helping to ensure everyone pays their fair share.