How to Report Suspected Tax Evasion to the IRS

Tax evasion involves the intentional underreporting of income, exaggeration of deductions, or failure to file a tax return to unlawfully reduce a tax liability. These actions undermine the integrity of the tax system. Individuals who become aware of such activities have a pathway to report their suspicions to the Internal Revenue Service (IRS). This guide provides an overview of how to report suspected tax law violations.

Information and Documentation to Gather

Before reporting a suspected tax violation, gathering specific and credible information is an important step. The IRS relies on detailed facts to evaluate a referral. The most useful information begins with the identity of the person or business, including their full legal name, current address, and a Social Security Number (SSN) for an individual or an Employer Identification Number (EIN) for a business.

A comprehensive report includes a clear description of the alleged violation. This could involve a business paying employees in cash to avoid payroll taxes, an individual failing to report income from a side business, or someone claiming false deductions to lower their taxable income. Pinpointing the specific tax years involved and estimating the dollar amount of unreported income provides the IRS with a sense of the scale of the potential non-compliance.

Supporting documentation is also highly valuable for an investigation. This can include copies of financial records, bank statements, invoices, ledgers, receipts, or emails that substantiate the claim. It is important to provide only copies of these documents, never the originals.

Completing the IRS Information Referral

Once you have gathered the necessary information, the next step is to formally document it for the IRS. The primary method for this is IRS Form 3949-A, Information Referral. This form is designed to capture the details the IRS needs to assess a claim and can be found on the official IRS website, IRS.gov.

Section A asks for the identifying information of the person or business you are reporting. Section B is where you describe the alleged violation, and it includes a checklist of common tax violations, like “unreported income” or “false deductions.” This section also provides space to detail the facts of the case, including the tax years involved and the estimated dollar amounts. You should provide a clear and concise narrative of how you learned about the information. If you prefer not to use the form, you can submit a detailed letter containing all the same information required by Form 3949-A.

Submitting Your Report to the IRS

After completing Form 3949-A or drafting a detailed letter, the final step is to submit it to the correct IRS office. You should check the instructions on the most recent version of Form 3949-A from the IRS website to confirm the current mailing address before sending your report. Once the report is submitted, the process moves entirely into the hands of the IRS.

Due to taxpayer privacy provisions under Internal Revenue Code Section 6103, the IRS is legally prohibited from providing you with any updates on the status of the case. You will not be notified whether an investigation has been opened or receive a report on the outcome. The IRS will review the information provided and determine the appropriate course of action based on its internal criteria.

The IRS Whistleblower Program

Separate from the general reporting process is the IRS Whistleblower Program, which offers a potential monetary award for cases involving significant tax disputes. This program is governed by Internal Revenue Code Section 7623 and requires a different submission process. To be eligible for an award, the information you provide must relate to a case where the tax, penalties, and interest in dispute exceed $2 million. For cases involving individual taxpayers, their annual gross income must be more than $200,000 for at least one of the tax years in question.

Individuals who believe their information meets these high-dollar thresholds must file Form 211, Application for Award for Original Information. This form is distinct from Form 3949-A and signals a formal claim for an award. The information provided must be specific, credible, and substantially contribute to the collection of taxes. If the IRS uses the information to collect proceeds, the whistleblower may receive an award between 15 and 30 percent of the amount collected.