What law protects whistleblowing about tax fraud or violations of IRS rules?

The whistleblower protection provision of the Taxpayer First Act provides robust protections for a whistleblower disclosing tax fraud to their employer or the IRS. The scope of protected disclosures includes 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. Examples of Taxpayer First Act protected disclosures include:

Misclassifying employees as independent contractors;
Laundering money in off-shore accounts;
Concealing income or assets in foreign corporations or foreign or domestic trusts;
Shifting revenue to a foreign subsidiary to pay a lower tax rate;
Maintaining two sets of books;
Improperly claiming the Research Credit – created as an incentive for private industry to invest in research, to qualify for the credit, a business’s research activities must involve a process of experimentation using science with a goal of improving a product or process the business uses or holds for sale, lease, or license;
Improperly claiming the Fuel Tax credit – as a credit on off-highway business or farming use of fuel, this is not available to most business, though it’s a commonly-claimed business credit;
Inflating charitable donations;
Manipulating income that should be reported on a corporate tax return and instead applying it to a personal tax return;
Using withheld taxes from employee paychecks for personal use, rather than paying the withheld taxes over to the IRS;
Creating extraneous corporations to conceal a business’s actual owner;
Extensively using cash transactions to underreport income, or otherwise underreporting income; or
Claiming personal expenses as having been for a corporation’s business purposes.

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