How to Report a Business Not Paying Taxes to the IRS

To report a business that is not paying taxes to the IRS, file Form 3949-A, Information Referral, either online at irs.gov or by mail to the IRS in Ogden, Utah. You can file anonymously, you do not need proof of fraud to submit a tip, and federal law protects employees who report their employer from retaliation. If the unpaid taxes are large enough, you may also qualify for a monetary award through the IRS Whistleblower Program.

What the IRS Considers Reportable

The IRS is looking for intentional conduct, not bookkeeping errors. A tip is worth filing when you have reason to believe a business is deliberately avoiding taxes it owes. The agency specifically lists these patterns as reportable:¹

Collecting cash sales and leaving them off the return
Claiming deductions or exemptions the business never actually paid or inflating real expenses
Paying workers off the books, with no withholding and no W-2
Altering invoices, receipts, or financial records
Keeping two sets of books — one showing real revenue for internal use and one showing less for tax purposes
Not filing federal returns at all
Withholding payroll taxes from employees but never sending the money to the IRS

You do not need to prove any of this. The IRS investigates based on credible tips, and specifics you can personally describe are more useful than conclusions about what the business must be doing.

Information to Have Ready

Before you fill out the form, gather what you can about the business. The more identifying detail you provide, the easier it is for the IRS to match your tip to the right taxpayer.²

The legal name of the business and any trade names or DBAs it uses
The street address where it operates
The Employer Identification Number if you know it, which is the most reliable identifier
The approximate tax years you believe the violations cover
A factual description of what you observed, such as cash sales going unreported or wages paid in cash without withholding

If you have documents like ledger copies, check stubs, receipts, or bank statements, hold onto them but do not attach them to your initial submission. The form asks whether books and records are available, and investigators will contact you if they need to see them.² Stick to what you have seen or can document. Skip guesses about motive or the amount of unpaid tax.

How to File Form 3949-A

Form 3949-A, titled Information Referral, is the standard IRS document for reporting a person or business you believe is violating tax law.³ You have two options.

File Online

The IRS accepts Form 3949-A directly through its website. You fill it out at irs.gov without downloading, printing, or mailing anything, and this is the fastest route.³

File by Mail

To use paper, download and print Form 3949-A from irs.gov, complete it, and send it to:

Internal Revenue Service
PO Box 3801
Ogden, UT 84409²

Certified mail gives you a receipt confirming delivery. You are not required to identify yourself on the form, so an anonymous report is allowed. Providing your contact information does let the IRS follow up if it needs more detail.

If the Issue Is Worker Misclassification

Form 3949-A is the wrong tool if your specific concern is that a business is treating employees as independent contractors to dodge payroll taxes. Two other forms handle that.

Form SS-8 asks the IRS to formally decide whether a worker is an employee or a contractor. Either the worker or the business can file it, and the ruling can lead to reclassification and back taxes for the employer.⁴

If you are the misclassified worker, Form 8919 goes with your own tax return. It calculates your share of the Social Security and Medicare taxes that were never withheld, and filing it puts the IRS on notice that the employer likely owes its share too.⁵

State Taxes Are a Separate Report

A report to the IRS does not reach your state’s tax agency. If the problem is unpaid state sales tax, unfiled state income tax returns, or similar state-level conduct, you have to file separately with your state department of revenue or taxation. Most states run their own fraud tip lines through online forms, email, or phone, and the exact process varies. Penalties at the state level can include license suspension, interest on unpaid tax, and civil fines. Prepare the same kind of information you would for the federal report.

What Happens After You File

The IRS reviews the tip and decides whether to open an investigation.² Do not expect a confirmation, status update, or outcome letter. Federal confidentiality rules under Internal Revenue Code Section 6103 bar the agency from telling you whether an audit was opened, what it found, or whether the business was penalized.⁶ Communication runs in one direction. The IRS may reach out if it needs more information or wants the records you flagged as available, and it can share your information with the Department of Justice if criminal charges become appropriate.

There is no cutoff for reporting. When a return is fraudulent, the normal three-year statute of limitations does not apply, and the IRS can assess additional tax for an unlimited period.⁷ Old misconduct is still reportable.

The Whistleblower Award Program

If your information is detailed and firsthand and the unpaid taxes are significant, you can apply for a monetary award. This is a separate track from the anonymous Form 3949-A tip and requires you to identify yourself and sign under penalty of perjury.⁸ The application is Form 211, Application for Award for Original Information, filed online or by mail.⁹

Large Cases

When the taxes, penalties, and interest in dispute exceed $2 million, and if the taxpayer is an individual with gross income above $200,000 in at least one year involved, the IRS must pay an award if it collects using your information.¹⁰ The award is 15 to 30 percent of what the IRS collects, based on how much your information contributed. It can be capped at 10 percent if the case turned mainly on information that was already public through government reports or news coverage, and it can be reduced or denied if you helped plan the violation.¹¹

Smaller Cases

When the amount in dispute is under $2 million, the IRS may still pay an award of up to 15 percent of what it collects, but it is not required to, and you cannot appeal a denial.¹²

Whistleblower claims are slow. The IRS cannot pay until the case is investigated and money is collected, which typically means audits, appeals, and sometimes litigation. Waits of several years are ordinary.

Retaliation Protections If You Work for the Business

Employees who report their employer are protected by federal law. Under 26 U.S.C. § 7623(d), an employer cannot fire, demote, suspend, threaten, harass, or otherwise discriminate against you for giving information to the IRS or helping in a tax investigation, and the protection extends to testifying or participating in related proceedings.¹¹

If retaliation happens, you can file a complaint with the U.S. Department of Labor. If the Department has not issued a final decision within 180 days, you can sue in federal district court.¹¹ Remedies for a successful claim include:

Reinstatement with the same seniority you would have had
Double back pay, plus lost benefits, with interest
Litigation costs, expert witness fees, and reasonable attorney fees¹³

These rights cannot be waived. A mandatory arbitration clause in an employment agreement is unenforceable for tax whistleblower retaliation disputes.¹³

What the Business Can Face

Willful tax evasion is a felony under 26 U.S.C. § 7201, punishable by up to five years in prison, a fine of up to $100,000 for an individual, and up to $500,000 for a corporation.¹⁴ Separate sentencing rules can raise the individual fine to $250,000. Failing to remit payroll taxes withheld from employees is its own crime under 26 U.S.C. § 7202, carrying up to five years in prison and fines on the same scale.¹⁵ Filing a fraudulent return can bring up to three years in prison. On the civil side, the fraud penalty can reach 75 percent of the underpaid tax, plus compounding interest from the original due date.

1
Internal Revenue Service. Report Tax Fraud, a Scam or Law Violation
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Internal Revenue Service. Form 3949-A, Information Referral
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Internal Revenue Service. About Form 3949-A, Information Referral
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Internal Revenue Service. About Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding
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Internal Revenue Service. About Form 8919, Uncollected Social Security and Medicare Tax on Wages
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Office of the Law Revision Counsel. 26 USC 6103 – Confidentiality and Disclosure of Returns and Return Information
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Internal Revenue Service. Time IRS Can Assess Tax
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Internal Revenue Service. Submit a Whistleblower Claim for Award
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Internal Revenue Service. Whistleblower Office Announces New Digital Form 211
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Internal Revenue Service. Whistleblower Office at a Glance
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Office of the Law Revision Counsel. 26 USC 7623 – Expenses of Detection of Underpayments and Fraud, Etc
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Internal Revenue Service. IRS Internal Revenue Manual 25.2.2 – Whistleblower Awards
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U.S. Department of Labor. Taxpayer First Act (TFA)
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Office of the Law Revision Counsel. 26 USC 7201 – Attempt to Evade or Defeat Tax
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Internal Revenue Service. IRS Internal Revenue Manual 9.1.3 – Criminal Statutory Provisions and Common Law