Legal Question in Criminal Law in California

You can report this to the IRS. I expect that they will trace the funds and attempt to find a bank account from which the take the amount of the tax return checks. It is unlikely that any criminal charges will be filed. The IRS will hold the funds until there is an agreement on its disbursal or there is a court order.

If the IRS doesn't know, and you are afraid of legal problems if they do, then you might report it yourself, but get actual legal advice before doing anything. If you are being charged with tax crimes, then you have to defend with whatever evidence you have to back up your claims. If serious about getting legal help, if the case is in SoCal, feel free to contact me.