Topic: Right to Privacy
Right to Privacy in IRS Audits and IRS Criminal Investigations
Protecting Privacy from IRS:
Safeguarding Privacy in the Collection of Information
The IRS reiterates repeatedly that “only the information necessary for the enforcement and administration of the tax laws which the IRS is authorized and directed to enforce will be sought” in any criminal investigation. See Internal Revenue Manual 18.104.22.168.3.1 (3) (09-‐ 25-‐2006); see also IRS Policy Statement P–1–1. Wherefore, IRS special agents have no authority to gather information beyond this. See Internal Revenue Manual 22.214.171.124.3.1 (3) (09-‐25-‐2006); see also IRS Policy Statement P–1–1. Very few actions can be taken without such authorization. See Internal Revenue Manual 126.96.36.199 (03-‐30-‐2012). Unless the investigative matters concerns “directly relevant investigative information” then “under no other circumstances will information on the personal habits of a person be gathered, developed or retained.” See Internal Revenue Manual 188.8.131.52 (3) (03-‐15-‐2007). A document is not directly relevant investigative information if it would “indicate a potential violation of federal law” concerning those laws “which the IRS is authorized and directed to enforce.” See Internal Revenue Manual 184.108.40.206 (03-‐15-‐2007). By rule and directive, “CI special agents will employ the least intrusive means necessary to acquire evidence in tax and tax-‐related title 18 investigations.” See Internal Revenue Manual 220.127.116.11 (4) (06-‐19-‐2008). As noted, during a grand jury, “neither special agents nor revenue agents may solicit or seek information for other than criminal purposes.” See Internal Revenue Manual 9.5.2..5 (11-‐05-‐2004).
Protecting Privacy from IRS:
Safeguarding Privacy in the Disclosure of Information
At all times, “information concerning a taxpayer should not be released to a third party without written authorization from the taxpayer.” See Internal Revenue Manual 18.104.22.168 (6) (09-‐27-‐2011). As the Service’s own rules dictate and the Service’s own admissions stipulate, “circular letters may not disclose that the taxpayer is under criminal investigation.” Internal Revenue Manual 22.214.171.124 (4) (10-‐04-‐2006). Additionally, following statutory requirements and due process demands, “Special agents will refrain from characterizing investigations as criminal” except in rare circumstances. Internal Revenue Manual 126.96.36.199 (02-‐01-‐2005).
"Return information" is defined in Section 6103 of the Code to include virtually all information collected or gathered by the IRS with respect to a any investigation concerning the taxpayer. It prohibits any disclosure of either tax returns themselves or return information, except as specifically authorized by that section. The statute authorizes the IRS to disclose tax returns and return information to the Department of Justice for use in criminal and civil tax cases on its own initiative (Section 6103(h)(2) and (3)) and for use in non-‐tax criminal cases pursuant to a court order (Section 6103(i)(1)). Sections 6103(h)(4) and 6103(i)(4) permit the Department to disclose such returns or return information in civil or criminal judicial proceedings relating to tax administration and in non-‐tax criminal cases and civil forfeiture cases, respectively. As the Department of Justice acknowledged in prior pleadings, memorandum, briefs, correspondence and directives, “the statute, as interpreted by the majority of the circuits, prohibits the disclosure from IRS or Department files of a tax-‐ crime defendant’s name, or the fact that he was under investigation.” See United States Attorneys Manual, Title 1, Section 28; see also Department of Justice Criminal Tax Manual 42.00.
“Return information includes…the fact that a person is under investigation.” See Internal Revenue Manual 188.8.131.52 (3) (B) (09-‐25-‐ 2006). “Official matters should not be discussed in public or within hearing of the public.” See Internal Revenue Manual 184.108.40.206 (3) (09-‐25-‐ 2006). IRS’ own manual accede that “target identification data” constitutes a “matter occurring before the grand jury” and thereby protected from disclosure by Rule 6(e) of the Federal Rules of Criminal Procedure. See Internal Revenue Manual 9.5.2..5 (11-‐05-‐2004).
Section 7431 of the Internal Revenue Code, codified in Title 26 of the United States Code, authorizes a civil action for damages against the United States, with a full and complete waiver of any sovereign immunity defenses or defenses derivative thereof, whenever an agent of the government engages in the unauthorized disclosure of return information. The statute requires a minimum damage award of $1,000 for each disclosure. The statute affords the right to recover punitive damages in addition to compensatory damages. Indeed, a willful disclosure by a government agent of such information is punishable as a felony under section 7213 of Title 26 of the United States Code.
A knowledgeable IRS defense lawyer can assert, help enforce, and guard your rights in the IRS criminal investigation process at many stages of the case before it gets too far. While the past cannot guarantee the future, it is a resume worth knowing when choosing your tax defense lawyer. Barnes Law enjoys a 90% success in preventing the government from imprisoning its clients even when only hired after a fraud audit or IRS criminal investigation has commenced, while protecting your privacy in the process. Choose wisely: your freedom, your future, and your finances often depend upon it.