Employees are often in positions to identify business misconduct. Professionals ranging from team leaders to accountants could realize that there are signs of financial misconduct at a business, such as tax fraud or evasion.
Organizations often go to extreme lengths to avoid taxes. Sometimes, those practices cross the line and become tax evasion instead of just tax avoidance. Someone aware of business misconduct that may have led to underpaying taxes could report that misconduct to the Internal Revenue Service (IRS).
Many people are reticent to speak up even when they have documentation of financial misconduct because they don’t want to lose their jobs. What should prospective IRS whistleblowers know about reporting a company’s tax misconduct?
They could receive whistleblower protection
Perhaps the most important thing for people to understand is that a company cannot penalize someone for reporting misconduct. Whistleblowers have protection from all forms of retaliation. Employers should not demote or fire someone because they report financial misconduct to the IRS. Workers who understand that they have whistleblower protection will be in a better position to assert themselves in their workplace and may recognize when they need to document certain company behaviors because they are likely part of a retaliation attempt.
They can receive compensation
Often, whistleblowers accept personal risk and workplace ostracization as the only compensation for doing the right thing. However, that is not the case for those reporting misconduct related to business income taxes. The IRS can sometimes compensate whistleblowers when the report that they make leads to the IRS recovering unpaid taxes from a business. The more serious the potential tax evasion or tax fraud scheme is, the greater the possible financial compensation the whistleblower might receive.
They could face charges if they don’t take action
When someone is aware of criminal activity, they are an accessory to that crime. It is incumbent upon anyone who discovers tax evasion or tax fraud to report the matter to the relevant authorities. Failing to do so means that they could end up implicated if the IRS discovers the issue later. Anyone participating in financial fraud could face prosecution even if they do not directly receive financial benefit from that fraud.
Although many people become very anxious at the prospect of reporting an employer’s misconduct, doing so is almost always a better option than ignoring illegal activity in the workplace. Becoming an IRS whistleblower could help someone protect themselves legally and change the way that a company operates to better comply with tax laws.