Reporting Tax Fraud

When is it appropriate for a tax preparer to report fraud and how is fraud reported to the IRS?  One year I had a taxpayer come in to apply for a RAL.  His return had been prepared by an attorney and he just wanted us to enter it into our system so we could e-file and apply for the RAL.  He had a very large refund.  I noticed that he had two Schedule Cs, one for a fast food franchise with a big profit and one for a “Gaming” business with an equally large loss.  Essentially, he was writing off his gambling losses against his business income.  However, he was not legitimately in the Gaming business.  I went into the back room, copied his return and documents and then gave them back to him and sent him on his way, advising that I could not help him.  The next day I reported him and his tax preparer to the IRS Criminal Investigation Division.  A few days later, a gun-carrying agent met with me, took the documents and I never heard anything after that.

Was I justified?  What experiences have you had?