John R. Bullis: Unauthorized disclosure of tax return

Joseph and Anna May got divorced in 2012. The attorney for Anna in the divorce proceedings was Melanie Moffat. In 2015 Joseph May sued attorney Moffat claiming Moffat published part of his 2014 tax return when it was identified as a document in the divorce proceedings.

Internal Revenue Code Section 7431 allows individuals to sue for civil damages if the tax return information is disclosed in violation of Code Section 6103. Section 6103 provides returns and tax return information is confidential and generally can’t be disclosed. Section 6103 defines the terms “return” and “tax return information” to cover materials filed with or received by IRS. The purpose of the Section 6103 is to keep the information between the taxpayers and IRS confidential by controlling the IRS disclosure of information it received from the taxpayers.

Joseph May claimed attorney Moffat made an unauthorized disclosure since his tax return information was part of the file for the divorce proceedings. He claimed more than 10 people had requested copies of that information from the court.

However, the district court held the attorney wasn’t at fault and dismissed Joseph’s claim. The court pointed out Code Section 6103 only applied to disclosure by IRS. Since Joseph provided the return information to attorney Moffat in the divorce proceedings, the disclosure wasn’t an unauthorized disclosure. Attorney Moffat received the information as a result of a court order for Joseph to produce his tax returns for the purpose of figuring child support obligations.

There’s another instance where unauthorized disclosure of tax return information was claimed. A woman called IRS May 19, 2015 to talk about a tax matter and her telephone conversation with an IRS agent broadcast on a national talk show program. The IRS agent called the talk show host as a listener. He was on hold and used another phone line to talk with the taxpayer. Somehow the talk show host picked up the call with the taxpayer and broadcast the taxpayer’s personal tax return information to more than 1 million listeners. The woman filed suit in district court alleging the disclosure of confidential information was damaging to her. It will be interesting to see how that matter is finally resolved.

The basic idea is your tax return information and the return itself are confidential between you and IRS. IRS is not to disclose those items except when that information is important to other government agencies and others who have a legitimate need for the information.

Sometimes a client will call and ask us to send a copy of their income tax return to a bank or mortgage company. We have to ask the client to authorize in writing to provide such disclosure, otherwise Code Section 6103 would be violated. The penalties are pretty severe, as they should be.

Did you hear? “Trust me, but look to thyself.” (Irish proverb)

John Bullis is a certified public accountant, personal financial specialist and certified senior adviser who has served Carson City for 45 years. He is founder emeritus of Bullis and Company CPAs.