Max Vs Irs Case Study

|For Project 6, complete Research Case 31 on page 458, Chapter 13. |
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31) Max and Annie are roommates sharing an apartment. Although they know each other well, they have respect for each other's privacy. Thus, when Max's Form 1040 was audited by the IRS, he
made no mention of the audit to Annie. When Annie was clearing the answering machine that they shared, she heard the following message: "Max, this is Richard, the IRS Auditor. My figures show that you the government $10,000 in taxes and another $4500 in penalties and interest."

When Annie brought up the message during dinner conversation that night, Max was furious. How could the IRS be so careless as to broadcast this news to a stranger? Did not he have any privacy and confidentiality rights? Max calls you to determine whether he might have a case against the IRS or Richard, the agent. Prepare a file memo assessing Max's position.

File Memo:

Tax6065-1
Tampa, FL
April 6, 2013

Relevant Facts
The IRS agent auditing Max's Individual Form 1040, left a detailed message with the results of Max audit, including the specific amounts of tax, interest and penalties, on an answering machine used by both Max and his roommate, Annie, without Max's prior consent.

Specific Issues
Does this constitute an unauthorized disclosure of personal, individual tax return information?

Conclusions
Generally, IRC section 6103 does define tax return information as confidential, and is not permitted to be left on an answering machine by an IRS agent, unless the agent has reasonable belief that the answering machine does belong to taxpayer either by their name being stated in the greeting or the taxpayer has indicated that is the number where he can be reached, according to IRM 11.3.2.6.1 (08-29-2008).
However, the findings of the court in Weiner v. IRS, 789 F. Supp. 655, 656 (S.D.N.Y. 1992), hold that the taxpayer would bear the burden of proof when making a claim of unauthorized disclosure under IRC section 6103, aff'd, 986 F.2d 12 (2d Cir.1993). So Max must prove he did not authorize the agent to call him at that number with the results of the audit.

Support
IRM 11.3.2.6.1 (08-29-2008) Leaving Information on Answering Machines/Voice Mail - basically does permit the disclosure of confidential tax return information on an anwering machine unless the agent has reasonable belief that it belongs to the taxpayer or has called the number provided by the taxpayer where he/she may be reached directly. Retrieved from:
http://www.irs.gov/irm/part11/irm_11-003-002.html#d0e1075

IRC Section 6103 - defines tax return information as confidential. Retrieved from: http://www.law.cornell.edu/uscode/text/26/6103?quicktabs_8=4#quicktabs-8

Weiner v. IRS, 789 F. Supp. 655, 656 (S.D.N.Y. 1992) - finds the taxpayer must show: (1) that the disclosure was unauthorized; (2) that the disclosure was made knowingly or by reason of negligence; and, (3) that the disclosure was in violation of section 6103. Retrieved from: http://www.leagle.com/xmlResult.aspx?xmldoc=19921444789FSupp655_11320.xml&docbase=CSLWAR2-1986-2006

IRS Publication 4639 (Rev. 10-2012) - reference guide covers the primary disclosure laws that affect the Internal Revenue Service (I.R.C. §§ 6103 and 6110, the Freedom of Information Act (FOIA), and the Privacy Act of 1974), related statutes, and testimony authorization procedures. Retrieved from: http://www.irs.gov/pub/irs-pdf/p4639.pdf

Actions to be taken

Prepare letter and review results with client.

Preparer: Stacey Fletcher

Reviewer: Bruce McClain