While there is no definitive way to spot fraud, there are some common warning signs that someone may be committing fraud. Using cash to purchase items that are hard to trace and easy to sell. For example, antiques, collectibles, and precious metals. Lie about their residence to avoid state income taxes. Examples of this include creating fake residences by renting post office boxes in states with no income tax. Falsely claiming dependents. This doesn’t just mean “inventing” children. It can also include claiming they cared for elderly relatives in an attempt to get Head of Household status and extra exemptions. Blatantly under-report business income by not documenting sales, performing services for cash, and recording non-existent purchases of goods or supplies. Paying employees and vendors in cash.
At this stage you can determine whether it is worthwhile to file the report. You can balance the amount of information you have versus how much information you need to file a complete report. The taxing jurisdiction is unlikely to act on a vague report with little or no details to back it up.
The Internal Revenue Service has jurisdiction over individual and business income taxes. Any suspected fraud concerning income tax should be reported to the IRS. The IRS also takes reports on tax scams by paid tax preparers and other abuses. [1] X Trustworthy Source Internal Revenue Service U. S. government agency in charge of managing the Federal Tax Code Go to source Every state has a taxing authority. It is often called the Department of Revenue, Department of Finance, or the Tax Commission. The states have jurisdiction over state income tax, sales tax, vehicle taxes, and other business taxes. [2] X Research source The county Treasurer or Assessor is responsible for collecting property taxes and managing tax funds that are collected by the state and rebated to the county.
The IRS provides checkbox choices on its reporting forms. Choices include false deductions, unreported income, and altered documents. For businesses, including households that hire domestic help, fraud can include failure to withhold and submit necessary employment taxes. [3] X Trustworthy Source Internal Revenue Service U. S. government agency in charge of managing the Federal Tax Code Go to source The state will be interested in the same types of income tax fraud and sales tax fraud. For example, if a business overcharges sales tax or fails to pay it to the state. [4] X Research source Property tax fraud can include false appraisals, lying about the use of the property, or having a senior citizen falsely listed as property owner to avoid property tax. [5] X Research source
If you are willing to identify yourself, you may be eligible for a reward as a whistleblower. If your information leads to the recovery of unpaid taxes, penalties, and interest, you may be eligible for a reward of up to 30 percent of the recovered amount. [6] X Trustworthy Source Internal Revenue Service U. S. government agency in charge of managing the Federal Tax Code Go to source
The Information Referral, Form 3949-A is the general form for all types of tax evasion and fraud. You can use this form to report an individual or a business. Fill out the form as completely as possible. Every bit of information aids the IRS in its investigation. You may not know details like Social Security number, but including the home address will help the agency identify the fraudster. [8] X Trustworthy Source Internal Revenue Service U. S. government agency in charge of managing the Federal Tax Code Go to source Another common type of tax fraud is stealing Social Security numbers. If you believe your SSN has been used by another person to gain employment or file tax returns, you should use Form 14039 (or Form 14039SP in Spanish. ) This is not an anonymous report. You want the IRS to help you regain your tax identity. [9] X Trustworthy Source Internal Revenue Service U. S. government agency in charge of managing the Federal Tax Code Go to source [10] X Trustworthy Source Internal Revenue Service U. S. government agency in charge of managing the Federal Tax Code Go to source Form 14157 is used to report complaints about a paid tax return preparer. You can report theft of refunds, incompetence in filing, falsifying documents, and failure to property complete or remit employment taxes. You are encouraged to identify yourself, but it is not required. [11] X Trustworthy Source Internal Revenue Service U. S. government agency in charge of managing the Federal Tax Code Go to source
To find the tax fraud reporting procedure and address, perform an online search for “[your state] tax fraud reporting”. You can also call the general information phone number for your state government or tax authority.
To file a written tax fraud allegation, you need to prepare a letter with all of the information you have, including name, address, business identification, and everything you know about the fraud. Use IRS Form 3929-A as a guide in preparing your letter.
At the county level, the tax fraud will most likely concern property tax or other local assessments such as tobacco or liquor taxes. Be as detailed as possible in your letter identifying the person or business, the type of fraud you suspect, and any details that you have.
The IRS will keep your identity secret unless you are required to testify in open court about the tax fraud you uncovered. [16] X Research source www. tax-fraud. net/tax-reward-questions. html However, you must identify yourself in Form 211 and cannot collect a reward if you anonymously report something to the IRS. [17] X Trustworthy Source Internal Revenue Service U. S. government agency in charge of managing the Federal Tax Code Go to source
In Florida, while you can report tax fraud anonymously, you will not be allowed to recover an award unless you provide your name. [21] X Research source
