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How To Turn Someone In For Tax Fraud

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How To Report Tax Fraud

Turn Someone in to the IRS

Tax fraud covers a range of activities, including filing a tax return under someone elses Social Security number, altering a tax return without the taxpayers consent and failing to follow federal and state tax laws. These are serious offenses that lead to fines and, in some cases, jail time. If you or someone you know is a victim of tax fraud, you probably want to know how to report tax fraud and what resources are available to help you.

  • How To Prevent Identify Theft
  • Will I Be Charged With Criminal Tax Fraud

    Statistically speaking, the chances of any given taxpayer being charged with criminal tax fraud or evasion by the IRS are minimal. The IRS initiates criminal investigations against fewer than 2 percent of all American taxpayers. Of that number, only about 20 percent face criminal tax charges or fines. In a recent year, only less than 2,500 Americans were convicted of tax crimes approximately .0022% of all taxpayers. Additionally, the unofficial minimum amount of taxes owed before the IRS will choose to file criminal charges is around $70,000, in cases involving multiple years of fraud.

    The term tax fraud is a general one which can refer to a number of different laws found in Title 26 and Title 18 of the United States Code . The main distinguishing feature of tax fraud is the taxpayers intent to defraud the government by not paying taxes that he knows are lawfully due. Tax fraud can be punishable by civil , criminal penalties, or both. For example, a taxpayer can commit tax fraud and be punished under 26 USC § 6663 with civil penalties, without actually being charged with criminal tax evasion under Title 26 USC § 7201.

    If you have concerns or fear you may be facing criminal tax charges, this eBook will help to educate you on the basics criminal tax fraud and your personal rights. We invite you to download our eBook and as always, please contact the experience tax attorneys at Robert J. Fedor, Esq., L.L.C. with any questions.

    How Many People Get Turned In To The Irs

    The Treasury Inspector General for Tax Administration provided some insight on the number of taxpayers turned into the IRS. The TIGTA report provided information on the number of Forms 3949-A received:

    The report also provided data on how many information referrals were audited and the additional assessments from the audits:

    The data clearly shows that many informant reports do not result in IRS activity. In fact, the data indicates that only a little more than 6% result in an audit.

    However, these leads are very fruitful for IRS auditors. The IRS clearly gets a substantial increase in average assessments from its informant-sourced audits vs. other sources of audits. For its Small Business/Self-employed audits, the IRS gets over a 64% increase in its information report sourced audits .

    In addition to audits, the IRS also sends a few of these referrals each year to IRS Criminal Investigation for review. The results of these investigations are not known.

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    What Does The Irs Do With The Information

    Informant referrals are looked at closely by the IRS. However, very few informant referrals make it into the hands of IRS agents for investigation. When the IRS receives the referral, they screen it for routing to specialists throughout the IRS. For example, complicated foreign bank account referrals may go to the IRSs Large Business and International Division. Unreported income from a small business owner may go to IRS Small Business/Self-employed units.

    The IRS can do internal and external research to determine if further action is warranted. For example, an information referral may allege that a taxpayer is a small business non-filer. The informant could provide invoices from the non-filer as evidence that they are in business and their website address. The IRS could review its records to see if the taxpayer filed a return. The IRS can also review the taxpayers website and see if they have been in business for the non-filing years. If validated, the IRS can send the report for a non-filer investigation.

    Reasons Not To Report A Cheat

    How to Turn Someone in to the IRS: 12 Steps (with Pictures)

    If your “information” is really just speculation, it’s probably best to keep it to yourself. As explained earlier in this article, the IRS does not have the resources to pursue your hunch.

    If you, yourself, are a tax cheat, it might be best to stay in the clear. There’s nothing that says that people who submit claims of cheating by others will have their own tax returns examined more carefully. Still, it stands to reason that you wouldn’t want to do anything to call the IRS attention to yourself if you’re not in compliance with its rules.

    If you helped plan or initiate the cheating of the person you are reporting, it might be smart to think twice. If you decide to report a crime in which you took part, be prepared for the consequences, and definitely don’t expect to receive a reward.

    As with many government processes, there’s a lot of red tape to cut through. Therefore, if you’re looking for fast cash, you might want to look elsewhere. It can take several years to complete an investigation of tax evasionand if there is no conviction, there is no award. Not only does the IRS have to determine guilt, it has to actually collect the amount owed before paying you. What’s more, if the IRS determines that your tip did not “substantially contribute to the Service’s detection and recovery of tax,” you will not receive an award.

    It’s also important to note that, under some circumstances, like attorney-client confidentiality, you may not be able to report tax cheating.

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    What Is An Irs Form 3949

    A Form 3949-A will be received by the United States Internal Revenue Service for issues related to taxes. The form is known as an Informational Referral, and it will be used by citizens to report any instances of suspected tax fraud in the country. These suspected tax violations could be performed by an individual or a business.

    Make sure this is the right form for your report. Once you are sure, you can start filling a Form 3949-A out. This form will require all the information you have about the individual or the business you are reporting. If you dont have a piece of information, just leave the spot blank. You will also need to identify the type of tax fraud you believe is occurring. If you have estimated financial amounts of unpaid taxes or the dates that the fraud occurred, you can include these. You can also include comments as needed.

    After filing this form, you may be contacted in regards to the report. This will ensure that the IRS can get as much information as possible about the suspected tax fraud. Make sure you list your current contact information on the form.

    Create a free Form 3949-A in minutes with our professional document builder.

    Cooperate With The Irs Investigation

    After you submit your forms and tax return, you will receive an acknowledgment letter. Your case will be assigned to the Identity Theft Victim Assistance organization, which has employees with specialized training to help you. Most cases are reviewed and resolved within 120 days, but some complex cases might take 180 days or more.

    If the IRS is unable to resolve the matter, you can contact the Taxpayer Advocate Service, a division within the IRS, to provide you with tax help. Contact your local Taxpayer Advocate Service office to speak with someone about the kind of tax-related problems you need help with.

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    The Voluntary Disclosures Program

    The CRA allows for the voluntary declaration of unpaid taxes, inaccurate information, and even unfiled returns through the Voluntary Disclosures Program . The VDP allows a taxpayer to proactively correct his taxes, potentially avoiding penalties or prosecution. Use Form RC199, the Taxpayer Agreement Voluntary Disclosures Program, to make a declaration.

    • You must take action before the CRA does, to qualify for any relieving provisions under such a disclosure.
    • The declaration must be complete and not attempt to hide additional irregularities.
    • The VDP is only used in cases where new information prevents a tax penalty.

    For example, if you miss reporting a T slip, voluntary disclosure is unnecessary, as this would only lead to a reassessment rather than punitive action.

    References & Resources

    Can I Report State Tax Fraud

    Local woman sentenced to 20 years in $5 million tax fraud case

    The IRS deals with federal income taxes. If you suspect a person or business of committing tax fraud at the state level, you should contact the states department of revenue or other taxing body to learn how to report the information. States have their own forms and rules for reporting fraud.

    For example, Colorado allows citizens to report suspected tax fraud online or by mail. South Carolina accepts its fraud complaint forms via email or mail. And New York accepts reports of tax evasion and fraud via an online submission form, phone, fax or mail.

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    Can I Remain Anonymous

    If youre worried about repercussions for reporting suspected tax cheating, or just prefer not to have your name attached to any information you submit, thats generally fine.

    Some of the tax fraud forms have a section for you to include your personal information so that the IRS can contact you for further information . But its not always necessary to fill out this section, so check the instructions for the form to be sure. On some forms, like the information referral form for tax fraud , the IRS says that any personal information you provide wont be shared with the person or business youre reporting.

    But there may be exceptions in certain situations. For example, if youre reporting a tax professional for suspected activity around your tax refund, the IRS may need your information to process your report and may even need to share certain information with your bank.

    Willful Evasion Or Simple Mistake

    Can claiming you made an innocent mistake on your tax return get you out of hot water with the Internal Revenue Service ? Maybe so, maybe not.

    Simple errors on tax returns are common. Individual taxpayers and business owners may forget a schedule, file a return with miscalculations, or misinterpret what is being asked. It happens. The IRS may catch it or may not. If you receive a letter from the IRS or become the focus of an IRS civil audit, it behooves you to speak with a tax attorney to review your tax profile and reporting. In some cases, there may be an opportunity to prove the miscalculation, while in other situations, it may be tough to prove it is not tax evasion.

    Lets look at the case of Mr. Jonathon Michael, a mechanic in Springfield, who worked with port operations in New Jersey. Like the rest of the working world, Mr. Michael was asked to designate his withholding allowance on an IRS W-4 form. The form allows an employer to calculate the amount of wages to withhold and pay the IRS on behalf of the employee. In 2014, Mr. Michael completed and submitted the W-4 form verifying he was exempt from federal income tax withholding.

    Employers annually provide the IRS with a W-2 form for each employee. The W-2 alerts the IRS to the actual wages, compensation, and withheld taxes paid by each employee. It is pretty easy math for an algorithm to compare incoming W-2s and W-4s. The difference can mean an IRS tax investigation. In this case, that is just what happened.

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    Procurement And Tender Anonymous Fraud And Whistle Blowing Hotline

    If you would like to report suspected corruption concerning SARS Procurement related matters, we have a confidential hotline. We appreciate your call and are committed to fighting crime especially if we find it in our own organisation.SARS hotline provides an anonymous reporting channel for unethical behaviour. At no time are these details divulged to the organisation / company where you are employed or to the individual whom you are reporting.

    Employer Skimming Off The Top

    How to Turn Someone in to the IRS: 12 Steps (with Pictures)

    With stacks of cash and money changing hands quickly, it’s easy to understand the temptation for restaurant owners to dip into those funds when cash is needed for personal expenses. However, two Texas restaurant owners took it to another level when they hatched a Tax Fraud scheme by skimming off their gross receipts and taking the money for their personal use. After seven years of fraud, the IRS caught up with them and they were sentenced earlier this month.

    From the Department of Justice Press Release:

    United States District Court Judge Xavier Rodriguez sentenced Michael Herman to 21 months in prison, and Cynthia Herman to five years of probation. On May 20, 2019, an Austin jury convicted Michael Herman and Cynthia Herman of conspiring to defraud the United States by impeding and impairing the IRS and filing false 2010 and 2011 individual income tax returns. Michael Herman was also convicted of filing false 2010 through 2012 corporate income tax returns.

    Judge Rodriguez also ordered the defendants to pay $157,719 in restitution, and Michael Herman to serve three years of supervised release.

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    Good To Know: Penalties For Criminal Tax Fraud And Civil Tax Fraud

    Civil tax fraud penalties are limited to monetary consequences and do not result in a criminal prosecution. Common civil infractions and their associated penalties include:

    • Fraudulent failure to file a tax return: 15% of the net tax due for each month up to five months with a maximum penalty of 75% of the unpaid tax
    • Filing a fraudulent tax return: 75% of the underpayment amount

    Criminal tax fraud can result in a significant period of imprisonment, among other penalties. For criminal tax fraud, the potential penalty is directly tied to the specific criminal charge you face. For example, some common crimes and punishments related to criminal tax fraud include:

    • Tax evasion: This crime carries a maximum sentence of five years imprisonment and a fine up to $100,000 for individuals or $500,000 for corporations.
    • Willful failure to pay tax, failure to file or failure to keep sufficient records: This crime carries a maximum term of imprisonment of one year, accompanied with a potential fine up to $25,000 for individuals or $100,000 for corporations.

    For What Should You Report Someone To The Irs

    If you want to report someone to the IRS, you need to check if there is something worth reporting. Here are the things that need to be reported:

    • When your or someone elses identity has been stolen.
    • Tax evasion failure to file tax returns, for example, or any other situation where taxes are avoided.
    • Tax fraud any activity thats designed to eliminate or reduce the taxes owed. This includes but is not limited to under-reporting income, claiming personal expenses as business expenses, claiming false deductions, hiding assets, transferring assets or income, etc.
    • If you have any information you believe the IRS needs and offers a reward for it.

    Most of these cases are different, and its worth knowing what to do in each situation. The IRS has a page where you can get all the answers you need.

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    The Irs Whistleblower Program

    How To Report Tax Fraud Anonymously

    The IRS Whistleblower Program is a program placed in effect by the IRS Whistleblower Office. This IRS Whistleblower Program pays money to people who report tax fraud or other IRS fraud by blowing the whistle on persons or companies who fail to pay the tax that they owe. Upon filing an IRS Whistleblower Claim, the IRS may offer a whistleblower reward of up to 40% of the additional tax, penalty or other amounts it collects or recovers through from the IRS whistleblower action, but only if the IRS uses information provided by the whistleblower.

    Useful Information You Can Provide Us

    IRS seeking Out Fraud from SBA PPP

    We will review the information that you have provided and will initiate investigation if our review indicates that a tax offence has likely been committed. To assist us in our review, please provide the following:

    • Particulars of the Tax Evader, Business or Company
    • Describe the method of the tax evasion and how the activities were conducted
    • Amount evaded and the year involved
    • Supporting information or documentary evidence currently in your possession showing the tax evasion. For example, copies of the records and documents such as ledger accounts, invoices, payment records. For those records that are not in your possession,please describe them and identify their location where possible.
    • Explain how and when you became aware of the tax evasion.

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    Other Ways To Report Suspected Tax Fraud

    Identity theft isnt the only type of tax fraud. The IRS also warns Americans to be on the lookout for individuals or businesses who are guilty of the following issues:

    • False exemptions or deductions
    • Organized crime
    • Failure to withhold

    If you suspect or know of someone committing tax fraud, you can report a scam using Form 3949-A. You can obtain a copy of the form by calling the IRS Tax Fraud Hotline at 800-829-0433, but the IRS will not listen to allegations over the phone, nor can you report tax fraud online at the IRS website. You can, however, report tax fraud anonymously.

    You can also send a letter that includes the following information:

    • The name and address of the person or business
    • The persons Social Security number or employer identification number
    • A description of the fraud
    • How you became aware of the information
    • The years in which the fraud occurred
    • The amount of unreported income
    • Your name, address and phone number

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