FOIA Lawsuit for Information Gathered from Tax Practitioners

0 Flares Filament.io 0 Flares ×

Today we welcome guest blogger Nick Xanthopoulos.  Nick was a staff attorney at Nevada Legal Services’ Low Income Taxpayer Clinic (LITC) from December 2014 until October 2016, and a staff attorney at Mid-Minnesota Legal Aid’s LITC from November 2016 until July 2019.  From August 2019 until November 2019, Nick was an attorney at Kennedy Law Offices, P.A., a boutique law firm in Eagan, Minnesota that represents clients in tax, business, and estate related legal matters.  Nick is currently on sabbatical. Tuan Samahon, a colleague of mine from Villanova, and Shawn Rodgers, both of whom specialize in FOIA litigation at Goldstein LP, will be handling the case. (Their pro hac vice motions are pending). Keith

Before 2018, tax professionals with an IRS power of attorney (Form 2848) on file went through a familiar process when calling the IRS to represent someone: we provided the taxpayer’s Social Security number (SSN) and name, our name and Centralized Authorization File (CAF) number (a unique identifier), and which tax years and forms we were authorized to discuss.  During these calls we were often asked additional information about the taxpayer to verify the taxpayer’s address or phone number but not personal information about ourselves.  Indeed, the Internal Revenue Manual (IRM), a guide that IRS employees are supposed to follow, says that only those items are needed to verify that a caller is an authorized third party.  (IRM 21.1.3.3(2).)

read more...

In January 2018, the IRS changed the procedure with no advance notice, and obviously, no opportunity for comment by the affected parties.  Since then, IRS employees begin nearly every phone call by forcing practitioners to say our own SSN, date of birth, and other personal information.  In gathering this information, the IRS should take responsibility for the protection of this information under Internal Revenue Code (IRC) section 6103 but also allow practitioners to know how it uses and protects that information.  If we refuse to state our confidential information during the recorded phone call, IRS will not let us represent our clients, thereby worsening an access to justice gap.  If we do answer the questions about our personal information, it becomes part of the client’s file.  I know that the IRS records calls and keeps them in taxpayers’ files because I have secured at least 4 such recordings through Freedom of Information Act (FOIA) requests.  In at least 2 of them, an IRS employee insisted on me stating my SSN despite knowing that my client was listening.

I have had several clients who were victims of tax-related identify theft.  ID theft damage can only be mitigated, never fixed.  Yet no IRS employee has ever instilled me with any confidence that the IRS would redact my SSN from all recordings and all case notes.  As a result, I have refused to state my SSN during any call when I was representing a client.  Practitioners should never be forced to choose between representing someone as effectively as possible and protecting ourselves from identity theft or other misuse of our own personal information.  If the IRS published the procedures it follows to ensure practitioners’ information is kept separate from clients’ files, then practitioners could make an informed decision about whether it is safe to state our SSNs in order to represent our clients.

In June 2019, Professor Keith Fogg and I made a FOIA request for “IRS agency records relating to precautions taken to safeguard the confidentiality of return and return information taken by the IRS from tax practitioners.”  In response, the IRS directed us to the www.irs.gov version of IRM 21.1.3.3, which is heavily redacted, and provided no other agency records.  In explaining why it redacted much of IRM 21.1.3.3, the IRS claimed the “records or information [was] compiled for law enforcement purposes” and that release “would disclose techniques and procedures for law enforcement investigations or prosecutions or would disclose guidelines for law enforcement investigations or prosecutions if such disclosure could reasonably be expected to risk circumvention of the law.” When Professor Fogg and I administratively appealed the partial denial of our FOIA request, the IRS Independent Office of Appeals summarily upheld the IRS decision.

As a result, Professor Fogg and I sued the IRS. We filed a complaint on November 29, 2019, in US District Court in the District of Minnesota seeking production of the requested records.  The IRS claims that the new authentication procedure’s “intent is to enhance protections for tax professionals and their clients.”  (IRM 21.1.3.3(3).)  The public and tax practitioners should have the right to see agency records about how the IRS is protecting tax professionals when the IRS forces professionals to state their own confidential information in order to represent a taxpayer.

The treatment of the information of professionals seeking to represent taxpayers should not be the type of information that the IRS hides from the professionals to protect law enforcement.  These professionals are not the taxpayers in the case and are seeking only to represent the taxpayers.  To hide from them the uses of the information and the safeguards surrounding the information denies them the opportunity to make an informed decision.  This is particularly important when the IRS has adopted a procedure without notice and comment and without input from the affected community.

Tax professionals provide an important service to the tax system.  They should not be treated as criminals entitled to no voice in what personal information is elicited from them nor have the use of the information hidden from them. Of course, the IRS has an important job in making sure that it only provides a taxpayer’s information to a properly authorized representative. That aspect of its mission, however, does not give it carte blanche to gather and use all manner of information from the professionals who practice before it, especially without giving those professionals a voice in what information is gathered, the safeguards placed on that information and the uses of that information.

The goal of the FOIA litigation is to find out answers to these questions so that the practitioner community can begin to have a voice in how its information is used by the IRS and protected from abuse.  Please take a moment to learn more about this important issue by reading the FOIA complaint.  You can access the complaint (including exhibits) for free here, thanks to Syracuse University’s Transactional Records Access Clearinghouse (TRAC).

Comments

  1. The correct term is “carte blanche,” French for “Carta Blanca,” a Mexican beer whose name literally means “drunk with power.”

    Seriously, one cannot be too careful about protecting taxpayer identity, even when it means failure to protect practitioner identity. I encourage tax lawyers to Take The Pledge: In any Tax Court appearance, demand to see a photo ID of IRS counsel. Might as well include the judge. Otherwise, how do you know whom you are really dealing with?

    I’m not sure why this case was filed the day after Thanksgiving, but I’m thankful that someone cares about the issue. Even if it means that Commissioner Rettig now doesn’t have to comment on it for a couple years, because of pending litigation.

  2. Kenneth H. Ryesky says

Comment Policy: While we all have years of experience as practitioners and attorneys, and while Keith and Les have taught for many years, we think our work is better when we generate input from others. That is one of the reasons we solicit guest posts (and also because of the time it takes to write what we think are high quality posts). Involvement from others makes our site better. That is why we have kept our site open to comments.

If you want to make a public comment, you must identify yourself (using your first and last name) and register by including your email. If you do not, we will remove your comment. In a comment, if you disagree with or intend to criticize someone (such as the poster, another commenter, a party or counsel in a case), you must do so in a respectful manner. We reserve the right to delete comments. If your comment is obnoxious, mean-spirited or violates our sense of decency we will remove the comment. While you have the right to say what you want, you do not have the right to say what you want on our blog.

Leave a Reply to Bob Kamman Cancel reply

*