Thirteen percent of Americans think cheating on income taxes is okay, as CNNMoney.com reported in 2010. If you don't, you can turn in a cheater and even collect a reward under certain conditions. One whistleblower received more than $100 million in 2012, according to The Wall Street Journal. The IRS has different methods to report cheating depending on whether you want to collect or simply see the bad guys punished.
You can collect money under IRS whistleblower rules only if you have actual facts that help the IRS collect unpaid taxes and penalties. You must file for the reward under your real name using Form 211, available on the IRS website. Provide your personal data, the personal information of the cheater and specific details on the case. Just like all parts of the tax code, this program has its complications. In fact, you'll have a better chance of collecting if you get legal help in making your claim, according to The Wall Street Journal.
The IRS has two different types of awards as of 2012, depending on how much money the cheater owes. The big money goes to whistleblowers who turn in cheats owing more than $2 million, including taxes, fees, interest and penalties. If the cheater is an individual, she needs a gross income of more than $200,000 per year to fall in this category. The government will pay you between 15 and 30 percent of what it collects from these big fish if you meet all the conditions. You can also appeal in tax court if you think your payout is too stingy.
You normally collect less for turning in a small-time tax cheat. These are cases that net the IRS less than $2 million or that involve a cheater who makes less than $200,000 per year. Your maximum payout is 15 percent of the amount collected, or no more than $10 million. The IRS makes these awards at its discretion, which means there's no guarantee you'll collect. These small cases have other differences from the big ones. For example, you have to take what you get because you can't challenge the amount in court.
If you don't want any money for turning in a cheater, report the offense on IRS Form 3949-A. Download and print the form using the IRS website. Fill out the personal information on the cheater, plus details about the tax violations. The form also asks for your own name and personal information, but it's not required. If you do give your information, the IRS can keep it confidential. Mail the completed form to the Internal Revenue Service, Fresno, CA 93888.
You can also report tax cheats by letter if you don't want a reward. Include the name, address and taxpayer identification number of the tax cheat, along with information on the problem and how you learned about it. Tell how long the violation has been going on, and estimate how much income was hidden. The IRS requests your name, daytime phone and address, but this information is optional and can remain secret. Mail the letter to the address listed on Form 3949-A.
- CNNMoney.com: Rat Out a Tax Cheat, Collect a Reward
- Internal Revenue Service: Whistleblower - Informant Award
- Internal Revenue Service: How Do You File a Whistleblower Award Claim Under Section 7623 (a) or (b)
- Internal Revenue Service: How Do You Report Suspected Tax Fraud Activity?
- The Wall Street Journal: Ready to Wet Your Whistle?