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Restaurant’s Accountants Not Responsible for Employee’s Allegedly False Form W-2

July 17, 2013
Western Michigan Federal Courts

What is an employee to do, when he receives an incorrect Form W-2? Based on the recent decision in Swartwout v. Edgewater Grill LLC, No. 12-cv-130, the employee should not file a lawsuit for damages against the employer's accounting firm under the Internal Revenue Code, 26 U.S.C. § 7434.

In Swartwout, the plaintiff sued his former employer (a restaurant), the restaurant's owners, and the restaurant's accountants for allegedly submitting a fraudulent Form W-2 for plaintiff's yearly wages. The plaintiff filed his lawsuit under § 7434, which allows damages against "any person [who] willfully files a fraudulent information return with respect to payments purported to be made to any other person." The accountants sought summary judgment, alleging that they were not proper defendants because they were not the "filers" of the Form W-2 under the statute.

The Hon. Joseph G. Scoville agreed and granted judgment in favor of the accountants. The Court explained that liability under § 7434(a) is not available against "those who assist the employer in preparing and filing information returns under the Internal Revenue Code." Because the obligation to file a Form W-2 falls on the employer, "the statutory claim under section 7434(a) is solely against the employer." The Court also clarified that there is nothing within § 7434(a) that would extend liability to the accountants under theories of conspiracy, aiding and abetting, or joint enterprise.

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