The Internal Revenue Service doesn't make it particularly easy to report tax fraud. It's a big, complex entity and different kinds of fraud exist, so depending on the type of dishonesty you've become aware of, you might have to make your report to a certain department. While you do not necessarily have to reveal your identity to report fraud, you might be shortchanging yourself if you don't.
IRS Informant Program
The basic IRS informant program offers a reward of up to 15 percent of the money the government recovers because of your tip. Typically, this involves reporting on average taxpayers, not mammoth-sized corporations. Although you can make these tips anonymously, the problem is obvious – if you don't reveal your identity, you can't collect the reward.
Filing a Claim
In many cases, you can't report fraud to the IRS by making a phone call and whispering the incriminating information to whoever answers the line. The government offers a form on the IRS website that you must complete and either fax or mail in. It also offers a toll-free hotline, but the operators can only give assistance for accessing the form and submitting it.
If you decide you want the reward, the IRS promises that your identity will be kept a secret. It's confidential – the government won't reveal your name to the person or company they're investigating, and the public won't know your name. However, you may have to supply certain documents and information to substantiate your claim. Some of this information will probably be personal, such as a Social Security number or copies of financial documents, and only someone close to the taxpayer would be aware of it or be able to access it. The alleged tax cheater would probably realize this. Another problem is that tax fraud is a criminal matter. If the case goes to trial, the IRS may require you to testify, so your identity would then become known.
In 2006, the IRS upped the stakes for informants when it launched a whistleblower program that offered increased rewards if you turn in certain taxpayers. Although the smaller reward still exists and there are no limits to this – you can turn in someone who cheated the IRS out of $5 and earn 75 cents – the new program is aimed at high-dollar tax fraud. The reward begins at 15 percent and extends up to 30 percent, but the tax amount that you're alleging that was unreported must be $2 million or more. If you're turning in an individual, his gross annual income must be at least $200,000, as of 2014.