The Internal Revenue Service has been willing to accept tips from informants for almost 150 years, but it got serious about it in 2006 with its Whistleblower Program. The program offers some additional incentives to those who are considering turning in a tax cheat. You don't have to give your name when you report another taxpayer, whether it's an individual or a business entity. This might not protect your identity, however, and you might give up a lot in exchange.
The IRS has a form for just about everything, including turning in a tax cheat. If you know someone is fudging on their taxes, you can complete Form 3949-A, either online or by filling out a paper copy and mailing it in. You can also write the IRS a letter, giving identifying information regarding the person or business you're reporting. There's no rule that you have to sign either the form or the letter, but if you don't, the IRS can't follow up with you or ask for additional information, if necessary. If you do give your name, the IRS promises to keep it confidential.
The IRS doesn't want vague, unsubstantiated accusations. You might be furious with your ex or a previous employer and want the IRS to follow up on some misinformation you know they supplied on their returns, but it's generally not sufficient to give the IRS the name and just hint about your suspicions. Form 3949-A asks for a great deal of detailed information, from the taxpayer's Social Security or tax identification number to specifics regarding what you're alleging the tax cheat did. You'd effectively have to have some intimate knowledge of the situation and of the taxpayer.
It stands to reason that if you don't give your name and other identifying information to the IRS, they can't pay you for your trouble – and they will, under some circumstances. If your tip pans out, the Whistleblower Program awards 15 to 30 percent of whatever the IRS recovers if you've reported a business entity, and if the recovery is $2 million or more. If you report an individual taxpayer, the taxpayer must earn in excess of $200,000 a year for you to be eligible for such a reward. If you report anyone who doesn't meet these two criteria, you can still earn 15 percent of what the IRS recovers, up to a total payment of $10 million, so it might be worth it to give your name.
Anonymity involves more than just declining to identify yourself. As a practical matter, anyone in possession of the sort of intimate details required on Form 3949-A is probably very close to the taxpayer, or works for the business entity in some capacity. Even if you remain anonymous, the taxpayer you report might be able to figure out who you are with just a little deductive reasoning. The good news is that if you've turned in your employer, he can't legally fire you because of it. However, he might be able to make your job so miserable that you'll want to move on.