March 18, 2010
IRS is Cracking Down on Tax Fraud
Many people have heard of whistleblowing, but it can be hard to find specific information that lets you know how to do this in concrete terms that are understandable by someone who is not a lawyer or a CPA. Luckily, reporting tax fraud is becoming much more defined as the government and the IRS attempts to find ways to clarify the laws. They also have been trying consistently to come up with ways to protect people that come forward as an IRS whistleblower, and it is important to understand these changes to get an idea of how the program really works.
In some whistleblower cases in the past, it was extremely dangerous to a person to come forward and report their employer of tax evasion. An IRS whistleblower was just as likely to be fired as anyone else for coming forward and reporting tax fraud. However, experience has taught the government much in this regard and there now exist several federal and state laws that attempt to protect the rights of whistleblowers, and which do not allow for termination of an employee based on providing this kind of information in most cases.
There are still some gaps in the laws which provide protection to someone reporting tax fraud. Attention has been drawn to this by whistleblower cases which involve not for profit organizations. The federal law known as SOX (Sarbanes-Oxley Act) protects workers for non-profits against retaliation in such cases. There has not been as much development at the State level in this regard however, and although there is some protection afforded to non-profit employees, it is not yet something that is ironclad. This can and has resulted in lawsuits for wrongful termination when an employee of a non-profit organization feels he or she was let go as a result of reporting on wrongful activities on the part of their employer.
It is also interesting to note that along with increased protection for those who provide information about tax wrongdoings, the IRS has actually gone further to offer actual rewards to those who provide information which can result in the IRS collecting funds owed to them. This program has existed for some time, but has been expanded in the last several years to help compensate informants better, and with bigger rewards in cases of large scale tax evasion. The dynamics of whistleblowing have shifted, putting the emphasis and the reward on reporting tax evasion rather than on burying knowledge of it for fear of employment related consequences.