IRS updates guidance on government employee tax disclosure

The Internal Revenue Service has issued a tax ruling that updates rules relating to tax return disclosure restrictions for government employees in light of the Taxpayer First Act.

Revenue Ruling 2022-7, released Monday by the IRS, updates the 2004 forecast in Rev. Rule. 2004-53 pursuant to the Taxpayer First Act of 2019 explaining that all recipients of returns or return information pursuant to Section 6103(c) of the IRS, including government employees, are subject to the disclosure restrictions of section 6103(a) .

The earnings ruling provides some examples of hypothetical situations involving federal government employees, state government employees, attorneys and the parents of a five-year-old movie star. “Situation 6: G is the father of 5-year-old movie star H. H’s mother signs H’s return as the parent of a minor child and dies shortly thereafter. G is the guardian of H’s estate under applicable state law. G receives a notice that H’s return is under review by the IRS. G does not have a copy of H’s return, so G obtains the return and return information from the IRS. When later asked by a reporter how much income H had declared on the statement, G replied “three million dollars”.

The IRS headquarters in Washington, D.C.

Andrew Harrer/Bloomberg

The IRS notes that, generally, Section 6103 provides that tax returns and information about tax returns are confidential and cannot be disclosed except as expressly permitted by the Internal Revenue Code. Specifically, it prohibits the disclosure by officers or employees of the federal government, any state, or local government agencies, or certain other specified persons, of statements and return information obtained in the course of their service.

Notably, it does not attempt to address what to do with the disclosure of tax return information from a former President of the United States.

However, the guidelines point out, “There is no evidence that Congress intended to limit the disclosure of feedback information received by government employees under Section 6103(e) and (k)( 6) simply because they happen to be government employees. On the contrary, there are compelling reasons for these government employees to be subject to the same rules as other beneficiaries. For example, a private sector employer may take disciplinary action against employees who do not properly fulfill their tax obligations. If the re-distribution of tax return information is not permitted because the employer happens to be the federal government, federal employees who have failed to meet their tax obligations would be in a much better position than their private sector counterparts. This inappropriate result only occurs if section 6103(a) is interpreted to apply to individuals simply because they happen to be government employees. Accordingly, individuals are not precluded by reason of their status as government employees from re-disclosing returns and return information received under Section 6103(e) or (k)(6).

The Taxpayer First Act imposes certain restrictions on persons outside the IRS who can access tax return information. The IRS is not supposed to be able to release information about a tax return to any local, state, or federal agency or its contractors unless they have specific measures in place to protect information.

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