The source said on Wednesday that the investigation had been going on for at least a year.
Capello is still fiscally registered in Turin, where he undertook his last coaching post in Italy.
He is suspected of not having paid tax on sponsorship earnings and of diverting funds directly to foreign companies to avoid paying tax in Italy.
"As far as we know the Italian authorities are investigating a certain number of important people in the world of sport," an English Football Association spokesman said.
"We have spoken to Fabio and his advisers and they have explained the facts to us. The tax issues are in order."
English Football Association |
"We have spoken to Fabio and his advisers and they have explained the facts to us.
"The tax issues are in order.
"The FA have no further comment to make on this subject."
Turin prosecutors are also still looking into Juventus's books as investigations are ongoing into the affairs of former Juventus bosses Luciano Moggi, Antonio Giraudo and Roberto Bettega.
Valentino Rossi, former MotoGP world champion, has also been probed by Italian tax authorities in the past, because he was based in Britain while also spending a significant amount of time in Italy.
Son speaks out
"It is a tax inspection sparked by controls on the balance sheet of Juventus, a part (of the probe that dates back) from some time ago and is known to everyone," Capello's son and agent Pierfilippo told the
Gazzetta dello Sport website.
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"My father is innocent and we are really confident we will be able to demonstrate this simply and quickly."
Pierfilippo Capello |
"It follows the modus operandi adopted up to now to check the earnings of famous people. One of the reasons for this method is that these people, like my father, often change residence because of work."
Pierfilippo also told Sky Sports News: "My father is innocent and we are really confident we will be able to demonstrate this simply and quickly."
Capello was appointed England coach in December having won domestic titles with all four clubs he has managed - AC Milan, Real Madrid, AS Roma and Juventus.
The 61-year-old's last position was as boss of Real Madrid for a second time, where he was sacked last June despite helping the club to the La Liga title.
As well as living in Spain for a time, Capello has a home north of Milan and also owns a house in Switzerland.