Cecily Zamora
Federal law requires the Internal Revenue Service (IRS) to keep tax return information confidential, and the agency is barred from using the information for reasons other than tax administration. However, there are exceptions to this rule, and the IRS may disclose tax information to third parties in certain situations. For example, the IRS may share information with state agencies responsible for tax administration, law enforcement agencies for the investigation and prosecution of non-tax crimes, and other federal agencies such as the Social Security Administration. Taxpayers may also authorize the IRS to disclose their tax records to a third party and may revoke this authorization at any time.
| Characteristics | Values |
|---|---|
| Tax information disclosure to third parties | Requires permission from the taxpayer |
| Contacting third parties | Requires reasonable notice in advance |
| Disclosure of tax information by tax preparers | May result in criminal fines and prison |
| Disclosure of tax information to SSSA | Not allowed |
| Disclosure of tax information to state agencies | Allowed if requested in writing by an official designated to request tax information |
| Disclosure of tax information to law enforcement agencies | Allowed pursuant to a court order for investigation and prosecution of non-tax criminal laws |
| Disclosure of tax information to third parties during official tax administration investigations | Allowed if necessary to obtain information that is not otherwise reasonably available |
| Disclosure of tax information to SSA | Allowed if necessary to establish the taxpayer's liability |
| Disclosure of tax information to powers of attorney and other designees | Allowed with oral consent |
| Disclosure of tax information to competent authorities of foreign governments | Allowed if there is a tax convention or bilateral agreement with the United States |
| Disclosure of tax information to state agencies regulating tax return preparers | Allowed upon written request by the head of the agency |
| Disclosure of tax information to officers and employees of the Government Accountability Office | Allowed upon written request by the Comptroller General of the United States for specific purposes |
| Disclosure of tax information to officers and employees of the Department of Agriculture | Allowed upon written request by the Secretary of Agriculture for specific purposes |
| Disclosure of tax information to officers and employees of the Congressional Budget Office | Allowed upon written request by the Director |
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What You'll Learn
Taxpayer's right to confidentiality
The Internal Revenue Service (IRS) is committed to protecting taxpayers' civil rights, including the right to confidentiality. IRS Publication 1, Your Rights as a Taxpayer, outlines that taxpayers have the right to expect that any information they provide to the IRS will not be disclosed unless authorized by the taxpayer or by law. This means that, in general, the IRS may not disclose your tax information to third parties without your consent.
There are, however, some exceptions to this right to confidentiality. For example, IRC Section 6103(d) allows for the sharing of return information with state agencies responsible for tax administration, provided that the request is made in writing and signed by an authorized official. Similarly, IRC Section 6103(i)(1) permits the disclosure of return information to law enforcement agencies for the investigation and prosecution of non-tax criminal laws, pursuant to a court order.
In addition, the IRS may disclose limited information in the course of official tax administration investigations if necessary to obtain otherwise unavailable information. This includes disclosures to powers of attorney and other designees, as outlined in IRC Section 6103(e)(6) and (c). Taxpayers should also be aware that the IRS may share information with the Social Security Administration (SSA) about Social Security and Medicare tax liability if necessary to establish the taxpayer's liability.
It is important to note that tax preparers who knowingly or recklessly disclose or use tax information for any reason other than tax return preparation may face criminal fines and prison. Taxpayers who face discrimination or experience wrongful disclosure of their information can send a written complaint to the IRS Civil Rights Division, which does not tolerate discrimination based on age, color, disability, race, national origin, religion, sex, or other protected characteristics.
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Disclosure laws
The Internal Revenue Code (IRC) Section 6103 generally prohibits the disclosure of tax information by IRS employees. However, there are several exceptions to this rule. For instance, IRC Section 6103(d) allows the IRS to share tax information with state agencies responsible for tax administration upon receiving a written request from an authorised official. Similarly, IRC Section 6103(i)(1) permits the IRS to disclose tax information to law enforcement agencies for the investigation and prosecution of non-tax criminal laws, provided there is a court order.
In certain limited circumstances, the IRS may disclose tax information to third parties during official tax administration investigations if it is necessary to obtain information that is otherwise unavailable. This is allowed under IRC Section 6103(k)(6). Additionally, the IRS may share information with the Social Security Administration (SSA) about Social Security and Medicare tax liability to establish the taxpayer's liability. However, SSA employees are bound by the same confidentiality rules as IRS employees and cannot disclose this information to other parties, such as a State Social Security Administrator (SSSA).
Furthermore, disclosure laws apply not only to the IRS but also to tax return preparers. They are prohibited from using or disclosing tax information for any purpose other than tax return preparation. Violations of this law can result in criminal fines and prison time for the preparer.
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IRS's right to share information
The Internal Revenue Service (IRS) is committed to protecting taxpayers' civil rights and confidentiality. The Taxpayer Bill of Rights (TBOR) highlights the right to confidentiality, which states that taxpayers have the right to expect that any information they provide to the IRS will not be disclosed unless authorized by the taxpayer or by law.
IRC Section 6103 generally prohibits the release of tax information by an IRS employee. However, there are some exceptions. For instance, IRC Section 6103(d) allows for the sharing of return information with state agencies responsible for tax administration, provided the request is made in writing and signed by an official designated to request tax information. Similarly, IRC Section 6103(i)(1) permits the disclosure of return information to law enforcement agencies for the investigation and prosecution of non-tax criminal laws, pursuant to a court order.
The IRS may also share information with the Social Security Administration (SSA) about Social Security and Medicare tax liability if necessary to establish the taxpayer's liability. However, this provision does not allow the IRS to disclose tax information to the SSA for any other reason, and SSA employees are bound by the same confidentiality rules as IRS employees.
Additionally, the IRS can make limited disclosures of return information to third parties during official tax administration investigations if necessary to obtain information that is not otherwise reasonably available. This may include contacting third parties such as employers, neighbours, or banks, but the IRS must provide reasonable notice in advance.
The IRS is also authorized to share tax information with other federal, state, and local government agencies, as well as with foreign governments with which the United States has tax information exchange agreements. These information-sharing programs aim to enhance tax administration, address non-compliance, and strengthen relationships and collaboration between agencies.
It is important to note that taxpayers have the right to expect appropriate action against IRS employees, return preparers, or others who wrongfully use or disclose taxpayer return information. Taxpayers can also consent to the disclosure of their information to third parties, such as through a power of attorney or by providing oral consent for specific purposes.
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Taxpayer's right to sue for damages
In the United States, taxpayers have a right to confidentiality, as outlined in the Taxpayer Bill of Rights. This means that any information provided to the IRS will not be disclosed unless authorised by the taxpayer or by law. However, there are exceptions to this rule, such as when information is shared with state agencies responsible for tax administration or law enforcement agencies for the investigation and prosecution of non-tax criminal laws. Taxpayers also have the right to take legal action against employees, return preparers, and others who wrongfully disclose or use their tax return information.
Taxpayers can sue the Internal Revenue Service (IRS) in federal tax court for issues relating to their tax refund claim, an IRS audit, or a countersuit in response to the IRS suing for unpaid taxes. Additionally, taxpayers can sue if the IRS wrongfully collects tax from them or denies their rightful claim to a tax refund. Before suing, taxpayers must first attempt to resolve the issue administratively by contacting the IRS and explaining their dispute.
There are limitations to taxpayers' rights to sue for damages. For example, taxpayers cannot sue the IRS for emotional distress due to sovereign immunity. Damages are limited to actual, direct economic damages, plus the cost of the action. There is no cap on damages, but the taxpayer must mitigate. The statute of limitations for filing a lawsuit is two years from the accrual of the right of action or the date of discovery of the actions creating the liability.
In terms of tax implications, damages received for personal physical injuries or sickness are generally excluded from gross income. However, damages for non-physical injuries, such as emotional distress, defamation, and humiliation, are typically included in gross income but are not subject to federal employment taxes. It is important to note that the tax treatment of damages can vary depending on the specific circumstances and the nature of the claim.
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Taxpayer's right to legal representation
In the United States, the Internal Revenue Service (IRS) adopted a Taxpayer Bill of Rights in 2014, which applies to all taxpayers in their dealings with the IRS. This Bill of Rights outlines 10 fundamental rights that every taxpayer has, including the right to retain legal representation.
The right to retain representation means that taxpayers can choose an authorized representative to act on their behalf when dealing with the IRS. This representative can be any person of the taxpayer's choosing, such as an attorney, CPA, or enrolled agent. Taxpayers who cannot afford to hire a representative may be eligible for assistance from a Low-Income Taxpayer Clinic (LITC), which can provide free or low-cost representation in tax disputes before the IRS or federal court.
In addition to the right to legal representation, the Taxpayer Bill of Rights also guarantees the right to confidentiality. This means that any information provided to the IRS by a taxpayer will not be disclosed to third parties without the taxpayer's authorization or as required by law. Taxpayers can expect their information to be protected from wrongful use or disclosure, and IRS employees who violate this right may face legal consequences.
Furthermore, taxpayers have the right to receive clear and understandable information about their tax obligations. This includes the right to be informed about tax laws, procedures, and decisions regarding their tax accounts. Taxpayers also have the right to challenge the IRS's position, appeal decisions in an independent forum, and pay no more than the correct amount of tax legally due.
Overall, the Taxpayer Bill of Rights ensures that taxpayers have the right to legal representation, confidentiality, and fair treatment in their interactions with the IRS. These rights protect taxpayers' interests and ensure that they receive the assistance and support they need to comply with tax laws.
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Frequently asked questions
IRC Section 6103 prohibits the release of tax information by an IRS employee.
Yes, there are a few exceptions. IRC Section 6103(d) allows for the sharing of tax information with state agencies responsible for tax administration. IRC Section 6103(i)(1) allows for the sharing of tax information with law enforcement agencies for the investigation and prosecution of non-tax criminal laws. IRC Section 6103(k)(6) allows the IRS to make limited disclosures to third parties as needed to obtain information that is not otherwise readily available.
Yes, taxpayers may authorise the IRS to disclose their tax records to a third party by providing written permission to the agency. This authorisation expires after one year.
Victims of unlawful disclosure of tax matters may sue for damages of $1,000 or more for each act. Federal employees convicted of this crime must be fired and may also face criminal law charges and civil liability.
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