Report Income Tax Fraud

Audrey M. Jones
Women's hands in hand cuffs

Although taxpayers are not required to provide the Internal Revenue Service (IRS) with information about another individual's fraudulent tax behavior, they are encouraged to do so. Reporting tax fraud is a serious action and can result in the accused individual being fined or imprisoned.

Reporting Federal Income Tax Fraud

The IRS requires that reports of fraud be in writing. There are two ways to file a written report of tax fraud: submitting an IRS provided form or writing a letter. The information contained in your letter should be similar to what is requested on the form.

Form 3949-A

Form 3949-A titled "Information Referral" is used to report tax fraud. This form requires you to provide the contact information about the individual or business you are reporting. If you are reporting an individual, you may also indicate their marital status and spouse's name.

Next, you identify the type of fraud you believe is occurring and the amount of money involved. You are then asked to provide a brief description of the event or behavior that you believe to be fraudulent. Finally, you provide any information you have about the accused individual's banks.

Although there are spaces for this information, you only need to provide what you know and do not need to investigate the situation to uncover any that you do not. Therefore, your form is not invalid or incomplete if you do not know the individual's bank information or marital status.

At the very bottom of the form you are asked to provide your name and contact information. This section is optional; all reports of believed fraud are treated as though given anonymously. You may submit the form online or mail it to the agency's office in Fresno, CA.

Writing a Letter

If you choose to write a letter to report the fraud, its contents should contain as much information as possible. Your goal with your letter should be to enable the IRS to begin an investigation with the information you provide. In your letter, the IRS recommends you include:

  • The name and address of the person or company you are reporting
  • The Social Security or tax identification of the person or entity
  • A description of the believed violation
  • The timeframe in which the violation occurred
  • The amount of money involved
  • Your contact information

Once again, your letter will be treated as though submitted anonymously. Therefore, you may omit to provide your contact information.

Reporting a Tax Avoidance Scheme

A tax avoidance scheme is a plan aimed to assist taxpayers in avoiding paying taxes. These schemes are usually illegal and differ from tax settlement scams. To report such a scheme, you must complete an IRS-provided form. This form requires you to discuss:

  • The scheme's main tenants
  • How you became aware of it
  • The scheme designer or promoter's contact information
  • Whether any promotional materials were provided and if you are including copies of them
  • Any meetings or seminars held to promote the scheme
  • The geographic scope of the scheme and its intended audience
  • Your contact information

Once again, this information is treated as though provided anonymously. Therefore, you do not need to provide your complete contact information.

Reporting Fraudulent Professional Behavior

You may also report accountants and lawyers that you believe are engaging in tax fraud. To do so, you submit an email to the IRS Office of Professional Responsibility (ops@irs.gov). This email should contain:

  • The name of the professional and their field of work
  • The state in which they practice
  • Their contact information
  • They type of fraud you believe is occurring
  • Your contact information

Provide as much information as possible, but do not investigate the situation on your own. Your contact information is appreciated, but not required, to submit your report.

Reporting State Tax Fraud

Many states, such as New York and California, allow taxpayers to report local or state tax fraud online. Most times, these reports must be in writing and contain information similar to what is requested by the IRS for reporting federal tax fraud. However, some states permit you to contact their tax collecting agency over the phone to make a report.

Determining Whether to Report Fraud

Because of the potential consequences, reporting tax fraud is serious. In 2004, the IRS initiated 206 investigations of fraud and recommended prosecution for 167 of them. Overall, 117 of the prosecuted cases resulted in conviction and punishment of the reported individual.

This should not, however, deter you from reporting fraud. Tax fraud is a serious offense and if you believe it is occurring, you should report it to the appropriate authority.

Report Income Tax Fraud