Did you know that if you inform the IRS of tax cheaters, you can be rewarded a percentage of the taxes redeemed? Tax fraud can take a number of forms, such as declaring false exemptions, false deductions, narcotics income, unreported income, political corruption, failure to file a return, etc. According to a Forbes article in December 2009, 428 informants received a total of $12 million for their information that recouped the IRS $168 million from 2004-2005. With the passing of the Tax Relief and Health Care Act in 2006 (effective 2008), the IRS upped the ante. Learn how to report tax fraud to the IRS, and what the guidelines are for collecting a reward.
Things You Will Need
Knowledge and evidence of a tax cheater individual or corporation
Step 1With the passing of the Tax Relief and Health Care Act in 2006 (effective 2008), the government increased the monetary incentive whistleblowers can receive by reporting tax fraud to the IRS. Those who report tax fraud of greater than $2 million for a corporation (individuals who are being reported must have a $200,000 annual gross income) may be entitled to an award between 15% and 30% of the amount of back taxes, penalties and interest ultimately collected by the IRS. Those who report tax fraud that do not meet thes above thresholds may still be awarded up to 15% ($10 million maximum), at the discretion of the IRS.
Step 2People with information to report need to fill out Form 3949a and submit this information to the IRS Whistleblower's Office (Address: Internal Revenue Service, Fresno, CA, 93888). Information that is helpful includes the name of the person or corporation and their address, their taxpayer identification number or social security number, a description of the violation and how you became aware of it, the duration of the violation to the best of your knowledge, the estimated dollar amount of the tax fraud, and your personal contact information (you do not have to leave your contact information, but if you decide not to, you will most likely not get a reward).
Step 3In order to attempt to claim a reward on information you submitted, you need to fill out Form 211. The percentage of reward you receive, if you receive a reward, is at the discretion of the IRS (see Tips and Warnings below for more information).
The IRS does not move at a fast pace, and an investigation based upon your information may take up to 2 years to reach a conclusion. But with a little bit of patience on your part, you can help the IRS recoup over $400 billion in taxes owed with the possibility of helping yourself in the process.
Tips & Warnings
If you are an informant in a case that involves more than $2 million in tax fraud by a corporation or by an individual with $200,000 or more in annual gross income and you are unsatisfied with your reward (or you do not receive a reward), you can appeal to the Tax Court.
If you are an informant in a case that involves less than the $2 million threshold, you cannot dispute the reward outcome.