How to Report Tax Fraud
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Confirm Tax Fraud Before Reporting It
If you believe someone is committing tax fraud, try your best to confirm this before you report it. Asking the person outright would probably result in a denial, and if you do report it afterwards, the person will likely suspect you were the one who reported them. To avoid this, try confirming tax fraud in other ways; ask seemingly harmful questions about how they get paid, or ask them if they need help filing their taxes this year. If they say anything that confirms they are avoiding taxes, use your discretion when deciding whether or not this is enough evidence. Never steal or copy any personal documents to show the fraud without the individual's consent.
If someone confirms they are engaging in tax fraud but they are unaware of it, try helping the person pay their back taxes and correcting the fraud before reporting them. If they refuse after you tell them what they are doing is illegal, then it's probably time to report them.
Fill Out the Tax Fraud Form
The IRS prefers tax fraud to be reported by filling out a form, specifically, Form 3949-A. This helps the organization keep track of their incoming tips and act accordingly. You can download and print a copy of Form 3949-A directly from the IRS website using the link below; the form is in PDF format:
This form is used to report business and personal tax fraud. If you are reporting an individual for tax fraud because they are being paid under the table (that is, in cash or in an untraceable form where neither the employee or employer is paying taxes on the money)
you should include the information of the company who is paying the employee, as well.
Draft a Letter
If you'd rather not use the form, or you don't have enough information to complete the form, you can also write a letter to the IRS to report tax fraud. In the letter, you need to include the following information:
Full name of the person you are reporting; and/or
The full name of the business you are reporting; and
The physical address of the person and/or business you are reporting;
The Social Security number or EIN of the person, if you know it (partial is okay, too);
A description of the tax fraud taking place, including how long you suspect it's been going on and how much money is involved.
You should also include your first and last name, address, and contact information for the IRS to reach you if they need additional information. If you'd rather report the fraud anonymously, at the very least, provide an e-mail address or phone number so the IRS can contact you without knowing who you are. If you are worried the IRS will reveal who you are to the person you reported, rest assured that all reports are made in confidential and the IRS will never tell anyone who reported them.
Mail Your Information to the IRS
When you've completed the form or finished the letter, submit it to the IRS by mail using the address below:
Internal Revenue Service
Fresno, CA 93888
If you have any documents or photographs that will assist the IRS in their investigation of the tax fraud, you should enclose copies of those in your letter as well.Source: ehow.com