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Disclosure of Collection Activity with Respect to Joint Returns

Posted on Sep. 7, 2021

It’s the annual season for the reports from TIGTA mandated by Congress in 1998 and never unmandated.  So, each year TIGTA dutifully expends its resources on the problems Congress was concerned about in 1998, whether or not anyone is concerned about those issues today.  Some of the issues on which TIGTA writes its reports show that the IRS has persistent problems which, year after year, it cannot seem to fix.  One of the areas on which TIGTA reports annually and which the IRS cannot seem to fix is disclosing information on joint returns.  I wrote about this topic in 2020 and I wrote about this topic in 2018 when the annual TIGTA reports were released.  I probably sound like a broken record by writing on the topic this often, but the IRS needs to train its employees so they understand how the law works.

Congress recognized that in certain situations the collection of a taxpayer’s liability is tied to payments potentially made by others.  In these situations, prior to the change in the law creating an exception to the disclosure laws and allowing the IRS to provide information to jointly liable parties, it was impossible to obtain information about payments from those jointly liable parties.  The TIGTA report shows that it can still be a practical impossibility to obtain this information, even though Congress opened the door allowing those jointly liable to learn of payments made, or not made, by the jointly liable person.

The most recent TIGTA report on IRS compliance with the law allowing taxpayers access to information on joint accounts suggests that taxpayers still struggle to obtain this information.  The IRS continues to experience difficulties when it sets up mirrored accounts.  Read the prior post from 2020 linked above if you are unfamiliar with mirrored accounts.  These accounts create difficulty for the IRS and taxpayers alike who do not understand when they exist and how they operate.  Here is the primary finding of this year’s report, which sounds much like the primary finding from each of the last five years:

We reviewed judgmental samples of 124 Accounts Management case histories and 20 Field Assistance case histories documented in the Account Management Services system related to joint filer collection information requests in the W&I Division.7 Based on our review, we determined that employees did not follow the joint return disclosure requirements in 26 (21 percent) of the 124 Accounts Management customer service representatives’ history files and three (15 percent) of the 20 Field Assistance individual taxpayer advisory specialists’ history files. The 29 cases were errors because employees did not provide the requested collection activity to the divorced or separated spouse as required by law. In most cases, employees incorrectly stated that they could not provide any collection activity on the other joint taxpayer, such as whether the other taxpayer made a payment or the current collection status, because the taxpayers were no longer married nor living together. As a result, these 29 taxpayers or their representatives were potentially burdened with additional delays in resolving their respective tax matter. This has been a recurring issue for the last five years and we have made recommendations for the respective IRS business units we have reviewed to update the IRM as well as to provide additional training to their employees. The IRS should continue to address this issue in its respective business unit IRMs that provide guidance to employees who may respond to taxpayer inquiries about a joint return matter.

We also observed that 10 (38 percent) of the 26 cases with disclosure errors in Accounts Management and all three of the cases with disclosure errors in Field Assistance had “mirrored accounts.” Mirroring a joint account sets up two accounts, one for each of the taxpayers. Establishing two separate accounts provides the IRS a means to administer and track collection activity unique to each of the taxpayers. Each taxpayer remains jointly liable for the entire debt; i.e., mirroring an account does not divide the liability in half. Because joint filer taxpayers remain jointly liable, the same collection information, when requested, on mirrored accounts should be disclosed to both taxpayers as would be disclosed on any other jointly filed return, except when the request is for unrelated personal information.

In addition to looking at case files, TIGTA interviewed IRS employees, with 8 out of 24 responding incorrectly regarding information that could be provided to a divorced spouse when the question involved a “regular” account and 15 out of 24 responding incorrectly when the question involved a mirrored account.

Problems not only occurred when asking the employees questions regarding information that should be disclosed to the former spouse. TIGTA asked the IRS employees questions that made it clear the employees would provide information they were not authorized to disclose, including:

providing information about the other spouse’s location, name change, or telephone number; information about the other spouse’s employment, income, or assets; the income level of the other spouse at which a currently not collectible module would be reactivated; or the bankruptcy chapter filed by the other spouse.18 When asked questions about a taxpayer who was divorced or separated, five employees (21 percent) of the 24 interviewed responded that they would disclose some of these prohibited items about the other spouse.

This year’s responses continue to point to disclosure of information regarding ex-spouses as a weak point for the IRS. The law allowing some disclosure of information was enacted 25 years ago. Almost all of the persons surveyed would have started work at the IRS after the law went into effect. This is not a case of changes in the law creating confusion. Yet, confusion continues to persist.

It’s not clear if the problem is that the employees need more training or better training.  The persistent existence of problems in this area which TIGTA identifies year after year should cause the IRS to change its method of training employees so that it can ensure compliance with the law both for the benefit of ex-spouses seeking information and employees trying to keep from violating disclosure laws.

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