Brian, that would depend on her employment status; either as an independent contractor (1099) or employee (W2), which hasn't been disclosed in the exemplar.

If the prepared taxes are legitimate, there is no fraud as to tax reporting.

Assuming that the tax reporting in the returns is fraudulent, what's the downside for the employee? The employer cannot bring suit for breach of employment contract, since they cannot enforce a contract to commit fraud. In a way, one has to examine where is the actual "leverage" in this arrangement? Without more information (employee at will? nature of expenses covered? dispute resolution procedures) it remains hard to assess the virtues or downsides.