Not Everything is Protected
A common misperception about employment law is that the law will protect any employees who does the right thing and reports wrongdoing. Unfortunately, this is not always true. When an employee reports wrongdoing or possible fraud, only certain kinds of reports are protected.
Each situation is different and the law leaves many gaps in protection. For example, if an employee suspects securities fraud and reports it, whether that report is protected by law depends on whether the company is a publicly traded company.
Taxpayer First Act Now Protects Tax Fraud Whistleblowers
Before July 1, 2019, if an employee reported tax fraud and got fired for it, that was not illegal. The fired employee had no remedy for being fired except to report the company to the IRS and to hope for a bounty claim.
Last year, Congress passed a new law, the Taxpayer First Act, that finally closed this gap in protection. Effective July 1, 2019, federal law now provides extensive protection to an employee who reports possible tax fraud or violations of the internal revenue code, including a whistleblower cause of action.
To get protection, the employee must have a reasonable belief that the employee is reporting tax fraud or a violation of the internal revenue code. The employee can make this report either internally or externally. While some whistleblower laws require an employee to make a report to an actual law enforcement authority, this law does not — it is enough for the employee to report it to a supervisor.
Whistleblower Damages for Tax Fraud
If an employee makes this kind of report and gets fired for it, this new law gives the employee a claim with real teeth. The remedies an employee can seek include 200% of the back pay and 100% of any lost benefits. The employee can also recover “special damages” as well as attorney’s fees and costs.
180 Days to File Claim
If an employee has been fired for making this kind of tax fraud report, the employee must file a claim with the Department of Labor’s OSHA division within 180 days. So, an employee has no time to waste.
As tax season approaches, employees who see their employers violate the internal revenue code can at least know that some legal protection now exists if they decide to report it.