To report a cash-only business to the IRS, submit Form 3949-A, which you can complete and file online at IRS.gov. You can do it anonymously. If the suspected fraud is large enough, you can instead file Form 211 with the IRS Whistleblower Office and potentially collect 15 to 30 percent of what the IRS recovers. Depending on what you’ve observed, a state tax agency or the U.S. Department of Labor may also be the right place to file.
What to Gather Before You File
A vague tip won’t give investigators much to work with. Specifics do. Before you fill out any form, pull together as much of the following as you can:
- The business’s full legal name, any “doing business as” name on signage or receipts, and the complete street address.
- What the business sells or what services it provides.
- Dates and times you observed the business refusing cards, the absence of card-processing equipment, or posted “cash only” signs.
- Patterns suggesting unreported income, such as high apparent volume with no visible record-keeping, or discounts offered only for cash.
- Signs of structuring, meaning multiple smaller bank deposits used to stay under the $10,000 federal reporting threshold. Structuring is itself a federal crime, separate from any tax evasion.1Office of the Law Revision Counsel. 31 U.S. Code 5324 – Structuring Transactions to Evade Reporting Requirement
You don’t need ironclad proof. The IRS investigates based on credible tips, and your observations give them a starting point.
Filing Form 3949-A
For suspected federal tax violations, Form 3949-A is the standard reporting tool. The IRS accepts it for unreported income, bogus deductions, and failure to file, among other issues.2Internal Revenue Service. Report Tax Fraud, a Scam or Law Violation You can fill it out and submit it online through the IRS website.3Internal Revenue Service. About Form 3949-A, Information Referral
The form asks for the name and address of the business, a description of the suspected violation, and the tax years involved. You can report anonymously. The IRS states there are “several ways to report fraud and scams, including anonymously,” so you’re not required to identify yourself.2Internal Revenue Service. Report Tax Fraud, a Scam or Law Violation Including your contact information does let investigators follow up if they need clarification, which can make your tip more actionable.
Filing Form 211 for a Whistleblower Award
If the tax fraud is large enough, you may be entitled to a financial reward. The IRS Whistleblower Office pays awards to individuals whose information leads to a successful enforcement action. The mandatory award program applies when the IRS collects more than $2 million from the action and the target is either a business entity or an individual with gross income above $200,000.4Office of the Law Revision Counsel. 26 U.S. Code 7623 – Expenses of Detection of Underpayments and Fraud
When those thresholds are met, the award ranges from 15 to 30 percent of the total collected, including penalties and interest.4Office of the Law Revision Counsel. 26 U.S. Code 7623 – Expenses of Detection of Underpayments and Fraud You claim it by filing Form 211 with the IRS Whistleblower Office. Unlike Form 3949-A, this process is not anonymous. You must provide your identity, sign under penalty of perjury, and explain how you obtained the information.5Internal Revenue Service. Submit a Whistleblower Claim for Award Form 211 can be submitted online or by mail.
Not everyone qualifies. Current and former Department of Treasury employees are ineligible, as are federal employees who learned about the violation through their official duties.5Internal Revenue Service. Submit a Whistleblower Claim for Award For cases below the $2 million threshold, the IRS has a discretionary award program, though payouts tend to be smaller and less predictable.
When Another Agency Is the Better Fit
Tax evasion is the most common reason to report a cash-only business, but it’s not the only one. The right agency depends on what you’ve actually observed.
- State tax agencies handle cases where a business appears to be avoiding state income tax or collecting sales tax from customers without remitting it. Most state revenue departments have an online fraud-reporting portal or a phone hotline; search for “report tax fraud” on your state’s revenue website.
- The U.S. Department of Labor’s Wage and Hour Division handles businesses paying workers under the table in cash. That can involve dodged payroll taxes, sub-minimum wages, or avoided overtime. Complaints go to 1-866-487-9243 or through the online portal. Employees and third parties can both file.6U.S. Department of Labor. How to File a Complaint
- Your city or county business licensing department or consumer protection office handles a cash-only business operating without a required license or permit.
Nothing stops you from reporting to more than one agency when the violation spans multiple areas. A business paying employees in cash off the books is likely committing both a wage violation and a tax violation, and the IRS and DOL pursue those independently.
If You’re the Employee Reporting Your Own Employer
Federal law protects employees who report their employer’s tax fraud from being fired, demoted, suspended, harassed, or otherwise punished for providing information to the IRS, the Treasury Inspector General, the Department of Justice, or Congress. If an employer retaliates, you can file a complaint with OSHA and ultimately pursue a federal lawsuit. Remedies include reinstatement, 200 percent of lost back pay, full restoration of benefits, and reimbursement for attorney fees and litigation costs.4Office of the Law Revision Counsel. 26 U.S. Code 7623 – Expenses of Detection of Underpayments and Fraud
What Happens After You File
Don’t expect a follow-up call. Federal law makes taxpayer return information confidential, and the IRS is prohibited from disclosing whether it examined someone, what it found, or what action it took.7Office of the Law Revision Counsel. 26 U.S. Code 6103 – Confidentiality and Disclosure of Returns and Return Information You won’t hear whether your tip led to an investigation, an audit, or nothing at all. The IRS receives a high volume of referrals and prioritizes them based on the credibility and specificity of the information provided.
If you filed Form 211 for a whistleblower award, you will eventually hear back, but the timeline is often measured in years. The Whistleblower Office notifies you of the outcome once the case and any related appeals are fully resolved.
Avoid confronting the business directly or trying to investigate further on your own. Once you’ve filed, the matter is in the hands of investigators with subpoena power and access to financial records. If they need more from you and you left your contact details, they’ll reach out.