Protecting Tax Whistleblowers: The Anti-Retaliation Protections of the Taxpayers First Act

The Taxpayers First Act (TFA) essentially created an anti-retaliation provision for the IRS Whistleblower Program. Up until July 1, 2019, individuals that internally or externally reported tax fraud did not have statutory anti-retaliation protection at the federal level. Now, under the TFA, no employer, or officer, employee, contractor, or agent thereof, may take adverse action against an employee for providing information regarding underpayment of tax or any conduct which the employee reasonably believes constitutes a violation of the internal revenue laws or any provision of Federal law relating to tax fraud, when the information is provided to the IRS, Congress, other federal agencies, a person with supervisory authority over the employee, or any other person working for the employer who has the authority to investigate, discover, or terminate misconduct.[1] Importantly, the TFA protects both internal whistleblowers who report to their supervisors and external whistleblowers who report to the federal government, including by submitting information to the IRS Whistleblower Program.

The TFA is governed by the same requirements as many federal anti-retaliation statutes. The TFA is broad in its scope of covered adverse action, which includes harassment, threats, and any other form of discrimination. In this administrative process, and during any subsequent trial or hearing, the whistleblower must satisfy the burdens of proof under the “AIR-21” statute. Essentially, a whistleblower must prove that they (1) engaged in protected activity (such as reporting what they believe to be tax fraud to a supervisor or to the IRS), (2) that they suffered an adverse employment action, and (3) that their protected activity was a “contributing factor” in the decision to take the adverse action against them. Once the whistleblower meets these elements, the defendant can still escape liability if they can show by “clear and convincing evidence” that the adverse employment action would have occurred in the absence of the whistleblower’s protected activity.

The Supreme Court has recently held that the nearly identical language under the Sarbanes-Oxley Act’s anti-retaliation provisions, which also incorporate the AIR-21 statute, do not require the whistleblower to separately establish retaliatory intent or motive, or some form of animus.[2] Rather, a whistleblower need only establish that their protected report of a tax law violation played a role in the decision to take the adverse action against them – it is sufficient that the protected activity was one factor among many in deciding to take the adverse action.

Moreover, the TFA incorporates two other whistleblower friendly and protective aspects: First, it arguably explicitly includes actions taken “in the ordinary course of such employee’s duties” as protected conduct, meaning that an accountant or CPA whose job it is to raise potential tax law violations is still protected from retaliation for doing so. Second, TFA also explicitly covers as protected activity a report of “conduct which the employee reasonably believes constitutes a violation of the internal revenue laws or any provision of Federal law relating to tax fraud…” This “reasonable belief” standard generally means that a whistleblower does not have to be correct about the illegality of the conduct that they are reporting, they just need to have a reasonable belief. Consequently, even good faith but mistaken reports of illegal conduct could be protected activity.

A whistleblower who has suffered retaliation for internally or externally reporting tax law violations must file an administrative complaint with OSHA within 180 days of the adverse action.[3] After this administrative complaint has been filed, the whistleblower can exercise a “kick out” to federal court if no final order is issued in 180 days.[4] Importantly, the TFA invalidates all arbitration agreements that would otherwise cover the claim, and provides whistleblowers with the right to a jury trial.[5]

The TFA provides a broad spectrum of remedies, including reinstatement, “200 percent of the amount of back pay and 100 percent of all lost benefits, with interest,”[6] and attorney fees and costs.

Overall, the TFA is an important and necessary compliment to the IRS Whistleblower Program. As Congress appropriately realized in enacting the TFA, encouraging whistleblowers to come forward and report tax cheats requires both incentive and protection.

Clayton E. Wire is a Partner at Ogborn Mihm.

[1] See 26 U.S.C. § 7623(d)(1).

[2] See Murray v. UBS, SCOTUS Opinion available at

[3] Such a complaint can be filed online at

[4] See 26 U.S.C. § 7623(d)(2).

[5] See id. at (d)(2)(B)(v) and (d)(5)(B).

[6] See id. at (d)(3)(B)(ii).