Blowing the whistle on tax fraud can be a daunting decision. One of the primary risks is retaliation from employers. Whistleblowers may face job loss, demotion or other forms of workplace harassment. However, there are legal protections in place to help mitigate these risks. Several laws contribute to the extensive protections against retaliation, ensuring whistleblowers can report fraud without fear of losing their jobs.
Federal protections for whistleblowers of tax fraud
The legal landscape for whistleblowers has improved significantly in recent years. Safeguards against retaliation include reinstatement, double back pay and compensation for any damages suffered. These protections aim to encourage more people to come forward, anonymously if they wish, with valuable information:
- Taxpayer First Act: Enacted in 2019, this protects against retaliation for whistleblowers and requires the IRS to notify them when their information leads to an audit or examination.
- IRS whistleblower program: Offers monetary awards to individuals providing information on tax non-compliance. Awards range from 15-30% of collected proceeds. Whistleblowers can remain anonymous during the process.
- IRC Section 7623(b) Mandates awards for whistleblowers who provide information leading to the collection of additional tax, interest, penalties, or fines. Awards range from 15% to 30% of collected proceeds.
Additionally, the IRS Whistleblower Office provides a structured process for submitting claims. Ensuring that whistleblowers get updated about the status of their cases, this transparency helps build trust in the system, and it reassures whistleblowers that their contributions are valued.
The expanded New York False Claims Act
The New York False Claims Act is one of the few state-level statutes that specifically address tax fraud. While over 30 states have their own False Claims Acts, New York’s statute (updated in 2021) is notable for its expansive scope, including tax-related fraud, which the federal False Claims Act does not cover. This makes New York’s law particularly robust and unique in its approach to combating tax fraud at the state level. The statute includes significant penalties and a ten-year statute of limitations.
Whistleblowers can file qui tam lawsuits against individuals or entities that defraud the state by underreporting taxes. If the government intervenes, they are eligible for rewards ranging from 15% to 30% of the recovered amount, or 25% to 50% if it does not.
The personal impact of coming forward
The decision to blow the whistle on tax fraud can have a profound personal impact. While the financial rewards and legal protections are significant, the emotional toll should not be underestimated. Whistleblowers often experience a range of emotions, from anxiety and stress to a sense of fulfillment and pride. It’s crucial for individuals considering this path to weigh the potential personal costs and benefits carefully.
Support from family, friends, and legal professionals can be invaluable in helping whistleblowers navigate the challenges they may face. Ultimately, the decision to blow the whistle is a deeply personal one. Still, the proper support and resources can lead to positive outcomes for both the individual and society.
