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

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.

© 2020 Varnum LLPNational Law Review, Volume III, Number 199


About this Author

Ron Dewaard, Varnum, litigation attorney

Ron is a trial lawyer and former federal prosecutor who concentrates his practice in civil and white collar litigation, as well as internal investigations. He is a fellow in the American College of Trial Lawyers and has been recognized as one of Michigan's top lawyers by Best Lawyers®Super Lawyers®, Benchmark Litigation© and by Michigan Lawyers Weekly as a Leader in the Law. Ron is also chair of the firm's Litigation Practice Team.

Before joining the firm, Ron served as an Assistant United States...

Gary J. Mouw, Varnum, litigation lawyer

Gary’s practice is primarily focused on representing companies and individuals – in Michigan and across the country – in connection with government enforcement actions and white collar criminal defense. He has extensive experience conducting internal investigations in a wide range of matters, including antitrust claims, False Claims Act suits, and environmental matters. Gary has represented clients in investigations conducted by the United States Department of Justice, the United States Attorney’s Offices throughout the country, the United States Department of Defense,...

Bryan R. Walters, Varnum, business and IP litigation lawyer

Bryan helps companies successfully resolve business disputes, representing clients in a wide range of industries including manufacturing, health care, and professional services. Bryan believes in an individualized approach to each situation; some disputes are best resolved through early negotiation/mediation, while others should be actively litigated in court. Bryan is particularly experienced in federal court litigation, both in West Michigan and across the country. He also represents clients in intellectual property disputes involving trademarks, copyrights, patents,...

Kyle Konwinski, Litigation lawyer, Varnum

Kyle’s practice is commercial litigation. He has represented clients in a wide array of litigation, including trials, administrative trials, and on appeal. He has unique experience in environmental/land-use litigation and Employee Retirement Income Security Act litigation. Kyle has recovered millions of dollars for companies throughout the state that were victims of Blue Cross Blue Shield of Michigan's ERISA violations.

As for the environmental and land use area, Kyle has trial and appellate experience with contested case hearings in the Michigan Administrative...