Almost no one likes paying taxes. The filing process can be complex, and when you owe money, writing a check for hundreds — or thousands — of dollars can really put a crimp in your finances. However, taxes are vital to our country’s infrastructure and they fund important services and amenities we rely on every day. Without tax revenue, it would be impossible to maintain our country’s defense, major highways, schools, and more.
Therefore, when someone commits tax fraud and finds ways to avoid paying their fair share, it’s effectively stealing those amenities, and putting a greater burden on those people who do follow the rules and pay their taxes. Although the IRS often catches tax evaders and others who fail to follow the rules, the country’s tax collector also relies on citizens to report suspected tax fraud. If you think someone you know, or work for, is cheating the IRS, there are specific steps to take to report your suspicions to the IRS.
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What Is Tax Fraud?
The IRS investigates a number of different crimes that fall under the umbrella of tax fraud. These crimes can be committed by individuals, such as someone claiming false deductions, or companies, such as a business that pays employees “under the table” to avoid employment taxes.
Some of the most common forms of tax fraud include:
- Non-filing of taxes.
- Failing to report all income, or hiding or transferring assets to avoid paying taxes on them.
- Overstating deductions, claiming personal deductions as business expenses, or making false deductions.
- Making false accounting entries, or keeping two sets of books.
- Bankruptcy fraud.
- Money laundering.
- International tax evasion and foreign transactions.
- Illegal gaming or gambling operations.
These are just some of the crimes that the IRS is on the watch for. However, other forms of tax fraud, such as healthcare schemes that involve kickbacks or false billing, or corporate tax fraud involving the filing of false returns, can also be spotted by individuals working for these organizations.
Participating in any kind of tax fraud can result in major penalties, which, at a minimum, will include repayment of all money owed plus penalties, interest, and fines — and at the maximum, will include jail time.
How to Report Tax Fraud
If you spot signs of tax fraud, it’s your responsibility to report the information to the IRS so they can investigate and take action. All reports must be made in writing, and you can remain anonymous if your wish. To make your report, follow these steps:
Because the IRS takes fraud reports seriously, your report should contain as many details as possible, including the name of the person or company that committed the fraud, the dates of the fraud, the dollar amounts involved, details of the crime, and how you became aware of the issue. In other words, you cannot simply call the IRS and ask them to investigate someone without evidence — making a false report is a crime itself, and there could be legal consequences if you do.
You do not need to submit evidence with your initial report. If you include your contact information on the form, the IRS will get in touch if you indicate that you have copies of documents, books, or other evidence of the fraud and they need them for the investigation. Again, the more evidence you have to support your claim, the more successful the investigation will be.
Fill Out the Required Form
You’ll need to submit a form that corresponds with the type of fraud you’re reporting. You can find these forms on the IRS website, or call the Tax Fraud Hotline to request one.
- Form 3949-A: Use this form if you suspect or know that an individual or business is committing tax fraud, including not paying taxes, not filing taxes, making false deductions or exemptions, accepting kickbacks, not reporting income, falsifying documents, or involved in organized crime.
- Form 14157: If you suspect that a tax preparer or tax preparation company is involved in fraudulent or abusive activity, use this form.
- Form 14157-A: You may need to submit this form with Form 14157, if you suspect that a tax preparer filed or altered your tax return without your consent, and you need to change your account.
- Form 14242: Submit this form to report an abusive tax promotion or promoter.
- Form 13909: If you have suspicions about fraud related to a tax-exempt organization (such as a charity) use this form to report their activities.
- Form 211: The IRS will occasionally offer rewards for information related to tax fraud. If you have legitimate information to provide and want to claim a reward, use Form 211.
All of these forms must be submitted by mail to the appropriate address listed on the form. The IRS will not accept reports any other way.
IRS Fraud Hotline
Although the IRS does not accept tax fraud allegations or information over the phone, if you need to request a form or hear instructions for making a report , you can call the Tax Fraud Hotline at 1-800-829-0433. Otherwise you’ll need to make your report by mail. Keep in mind that you will not be updated on any investigations, and will only hear from the IRS if they need additional information from you.
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