What Happens When You Report Someone To The IRS?
There are cash advantages for people who become informants and report tax cheats to the IRS, known as whistleblowers.
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Key Takeaways:
- When you report someone to the IRS under the IRS Whistleblower Program for a case where an individual owes more than $200,000 or a business owes more than $2 million in taxes, you may be eligible to receive an award of 15 to 30% of the proceeds.
- Individuals reporting alleged tax evaders to the IRS must have significant evidence, such as letters, invoices, or other legitimate information sources that can be used in an IRS investigation.
- It is highly recommended to hire a whistleblower lawyer before reporting individuals or businesses to the IRS to ensure all standards are met and the application steps are followed accurately.
What Happens When You Report Someone To The IRS?
If you have valid forms of evidence that prove an individual or business to the IRS has violated tax laws in some way, reporting the case to the IRS helps the United States government with the collection of taxes that are rightfully owed, as well as potentially earn you a reward for “blowing the whistle.”
The IRS is mostly interested in pursuing cases involving the underpayment of taxes for which an individual owes more than $200,000 or a company owes more than $2 million.
There are two ways you can report potential tax fraud to the IRS: using the IRS Form 3949-A, Information Referral, or if you want to receive compensation for reporting someone, using IRS Form 211, Application for Award for Original Information.
What Are Tax Law Violations?
Deliberate violations of tax law in which a tax cheat attempts to scam the IRS by underpaying taxes, such as tax evasion, can have serious legal consequences, including penalties, fees, fines, interest on the unpaid tax liability, or potentially jail time, depending on the severity of the tax fraud.
Some examples of tax law violations include:
- Claiming a false personal exemption on a tax return
- Claiming a false itemized or standard deduction
- Claiming irrelevant adjustments or tax credits in an attempt to earn a tax refund, such as the earned income credit (EITC)
- Failing to withhold
- Failing to follow tax laws
- Filing with false or altered tax documents, such as a W-2 form
- Failing to pay taxes they owe
- Kickbacks
- Failure to report income
- Falsifying gross income
- Organized crime
- Identity theft
What Is The IRS Whistleblower Program?
The IRS Whistleblower Office was established to incentivize taxpayers to report tax noncompliance to the IRS, offering monetary rewards to individuals who submit information to the IRS that results in an audit investigation revealing tax fraud.
IRS Whistleblower Awards
Reporting someone to the Internal Revenue Service for alleged tax fraud under the confidentiality of the Whistleblower Program can lead to a whistleblower award of 15 to 30% of the proceeds.
How To Report Someone To The IRS
Here are the instructions on how to safely report someone to the IRS:
1. Hire A Whistleblower Attorney
If taxpayers decide to hire a whistleblower attorney to help them report someone to the IRS, they must file IRS Form 2848, Power of Attorney and Declaration of Representative, for the IRS to recognize the legal counsel and allow them to communicate with the IRS on behalf of the whistleblower.
2. Gather Credible Evidence About The Tax Fraud
For whistleblower claims to be accepted, the whistleblower must be able to provide credible information regarding the tax fraud activity.
The types of evidence that could be considered credible for whistleblowers to submit include:
- Copies of bookkeeping records and documents
- Copies of ledger sheets and books
- Bank account records
- Legal contracts
- Emails
- Receipts
It is important that people understand that any information provided by the whistleblower must be obtained legally, without any tax law violations. If the whistleblower cannot access the supporting information, they can instead describe where that information could be found.
3. Submit The Report Using IRS Form 211
After gathering credible evidence proving an individual or organization is committing tax fraud, you can report them to the IRS by filling out and submitting the IRS Form 211, Application for Award for Original Information.
Within this form, you must include identifying information about the individual or company you are reporting as well as a description of the alleged tax crime.
It is highly recommended to utilize the help of a tax professional with a thorough understanding of tax laws to ensure this form is filled out correctly.
How To Fill Out IRS Form 211
Section A – Information About the Person or Business You Are Reporting
Section A of IRS Form 211 allows you to fill out as much information as you can about the taxpayer who has committed tax fraud. The information to be included about the individual or business in this section is:
- Whether this is a new submission or a supplemental submission
- Name
- Social Security Number (SSN) or Taxpayer Identification Number (TIN), if known
- Address
- Date of birth or approximate age
- If the violation was first reported to an IRS employee, their name, title, and contact information
- Description of the alleged tax violation
- How you learned about the alleged tax violation and/or how you gathered the information supporting this claim
- Your relationship with the alleged noncompliant taxpayer, such as if they are your employer
- Tax amount owed by the alleged noncompliant taxpayer
Section B – Information About Yourself
- Name
- Date of birth
- Last four digits of their SSN
- Whether or not you are an IRS employee, the spouse or dependent of an IRS employee, an IRS contractor, or a federal, state, or local government employee
- Address
- Phone number
- Email address
- Declaration under Penalty of Perjury
If you are aware of an individual or business guilty of committing tax fraud and are wondering what your rights are as a potential IRS whistleblower, consulting with a tax professional at Ideal Tax can give you insight into everything you need to know. In addition, the tax pros at Ideal Tax can also answer your other tax-related questions, as well as help you through the process of filing your tax returns, calculating your tax liability based on your personal circumstances and filing status, and applying for tax debt relief options like an installment agreement.
Luis serves as the Director of Operations for Ideal Tax, overseeing a multifaceted team including case management, tax professionals, document specialists, customer support, training, and development.
