Reporting Tax Fraud

Tax fraud is a serious issue that could land you in a lot of trouble if you are caught. Tax fraud is the act of hiding or avoiding income in order to avoid taxes. While this is usually an issue that is seen with those who make a lot of money who are interested in hiding the money to keep their tax bills down, it is something that people of all income levels can do. It is believed that Americans owed more than $415 billion in unpaid taxes in 2008, and this number has been growing ever since. Whether someone is failing to report some income or is hiding it in some other manner, this is a serious crime.

To make sure that you are not hiding income involuntarily and that you are getting all your information placed correctly into your tax forms, make sure to contact a tax professional right away. And if you feel that you know someone who is committing tax fraud, make sure to follow the steps below to report it to the IRS as soon as possible.

Confirm the Fraud

You should take the time to confirm that someone is committing tax fraud before you report it to the IRS. A little suspicion is usually not enough although you may find that you are falling flat if you ask someone directly if they are participating in tax fraud. There are some other ways that you will be able to confirm tax fraud without getting an outright no or having the other person know it was you once the issue was reported. Asking some simple questions that seem harmless, such as how they get paid or if they have figured out how to do their taxes this year, can often just show interest rather than your true intent. You may be able to figure out that they aren’t getting paid by regular check or they are avoiding their taxes with these kinds of questions.

In some cases, the person may be committing tax fraud without realizing it is an issue. In these cases, it is best to help them out before reporting the error. Offer to help them with their back taxes or point them in the direction of a tax professional who can get it all straightened out in no time. If the person plans on not filing their taxes still or doesn’t seem to be interested in listening to you, it is time to report them to the IRS before this keeps on going.

Tax Fraud Form

The IRS has made it easy for taxpayers to report tax fraud in no time. The Form 3949-A is the one that you will be able to use. This is the form that is able to help the IRS keep track of all the tips that come in, and then they will act accordingly if they see a problem. Keep in mind that there are thousands of tips that come in all of the time so it could take a bit before the IRS is able to get to yours.

These forms are meant for both personal and business fraud. If you are doing personal, make sure to write down the name of the business who may be paying the other person under the table so that the IRS has all the information possible.

Writing a Letter

In some cases, you may feel that writing a letter is the best option. This can work if you don’t have enough information about the situation in order to fill out the form, such as not knowing the way that the person is getting paid or the company they are working for. You will need to include a lot of information if you are choosing to go with this method. Some things to have in your letter to the IRS include:

• The name of the person that you are reporting
• If you know this information, the name of the business you are reporting
• The physical address of who you are reporting or the address of the business you are reporting.
• If you have the information, the social security number of the person who is partaking in the fraud.
• As much of a description of the fraud as possible. You can include what kind of fraud is going on, how long it has been happening, and even how much money is involved if you know.
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Make sure to include some of your contact information in case the IRS needs to get ahold of you for any reason in regards to this situation. If you are uncertain of how the report or what information you need to report when you make claims of tax fraud, make sure to work with a tax professional. They can help you to fill out the form or write your letter and will make sure that it gets sent off to the right place. Keep in mind that even though you send out this information, you are not going to be in trouble with the IRS, even if it doesn’t turn out to be a case of tax fraud.

Dealing with tax fraud or back taxes can be a nightmare when the IRS catches you. Whether you are the one committing tax fraud or you have found out that someone else is partaking in this behavior, make sure to contact our offices to get this all sorted out.