Every year you save your receipts, track your expenses, and when April rolls around, you pay your taxes. But what if you know of someone who is not as honest as you?
When an individual or business intentionally hides their income, inflates their expenses, misrepresents information to be placed in a lower tax bracket, or reduces their taxable income, they are evading taxes.
The US Internal Revenue Service (IRS or Internal Revenue Service) estimates a “tax gap,” that is, a tax compliance rate of about $ 441 billion each year. Maintaining and improving taxpayer compliance is very important.
Despite the efforts, there is still a large amount of money in unpaid tax money, according to IRS. There is a significant gap between the evader and the IRS.
Fortunately, evaders are usually exposed either by a slip on their part or by the notice of a passerby, one who with conscience and firmness puts his grain to make the system work. If you want to help close that gap, you can. But how do you report fraud to the IRS? And why should you report a tax scam, at least a suspicious one?
According to the Revenue Service, tax fraud can be:
- False exemptions or deductions to reduce taxable income
- Illegal returns of part of payments received
- A false or altered document
- Failure to pay taxes
- Unreported income
- Abusive Tax Preparers and Other Forms of Organized Crime
- Lack of withholding tax
- Failure to comply with tax laws
When reporting tax fraud the IRS will need specific information, such as the type of violation and the availability of books or records.
The evasion must also be financially significant enough to justify the IRS opening an investigation. The IRS does not expect us to break any laws to help find possible tax fraud. It can take several years to complete a tax evasion investigation and if there is no precise conviction, there is no reward.
Nobody likes to pay more than their fair and exact share of taxes to have to compensate others who intentionally evade theirs. There is no reason for tax evaders to give up a portion of their income to provide resources that benefit the general good, such as a solid health system, roads, and sewers, along with other public works and social programs.
Reporting tax fraud is like reporting a shoplifter, you only ask them to pay for something they are trying to get unfairly, disproportionately.
The Treasury is not likely to open an investigation and go after someone without good reason. Make sure that the avoidance is financially significant enough because if time and resources are to be wasted, the chances that the efforts will result in a reward must be significant.
For example, stating that your neighbor did not report a $ 25 profit from babysitting is not going to interest the IRS at all. In addition to determining who, what, where, when, and why taxes were evaded, the IRS will need specific information alongside the type of violation such as the availability of books or records.
The IRS may pay compensation or rewards in exchange for valuable information that leads to the collection of taxes, penalties, interest, or other amounts from defaulting taxpayers. There are several types of damages awarded, depending on the income level of the evader and his classification (company or individual).
Regarding the amount of the rewards, the regulations of the Revenue Service stipulate, in the case of companies, if the disputed income exceeds 2 million dollars and some other qualifications are met, the IRS will pay 15 to 30 percent of the amount collected. It’s more than enough incentive to report tax fraud. The same percentage is paid in the case of individuals or individuals if their disputed income exceeds $200,000.
For those who do not meet these thresholds, the IRS may reward up to 15% of the revenue collected.