Federal Tax Information for

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Protecting

Federal Tax Information for

Government

Employees

When it comes to confidential tax information, remember:

“When In Doubt, Check It Out

Before You Give It Out!”

Publication 4761 (Rev. 9-2013) Catalog Number 53071T Department of Treasury Internal Revenue Service www.irs.gov

This guide provides you with basic information about:

++ The provisions of §6103 that protect tax returns and return information

++ The provisions of the Privacy Act and other statutes protect other federal data

++ The civil and criminal penalties for unauthorized accesses or disclosures

Safeguarding federal tax information is critically important. As the

employee of a federal, state or local agency who works with federal

tax returns and return information, you are responsible for protecting

that information.

Internal Revenue Code (the Code) Section (§) 6103 contains requirements

for both protecting and disclosing confidential returns and return

information. These provisions also apply to state employees who work

with federal tax data.

§6103 prohibits employees from disclosing federal returns or return

information unless allowed by law. You need to understand and apply

the provisions of §6103 that relate to your job performance.

Specific Provisions of §6103

§6103(a) - The general prohibition against disclosure. It specifically names

state employees among those who may not disclose returns and return

information unless permitted by an exception in the statute.

The General Rule – Tax Information Is

Confidential!

§6103(a) provides that all returns and return information are confidential.

No current or former employee of the IRS, state or federal agency may

access or disclose returns or return information unless specifically

authorized under provisions of the Code.

§6103 permits IRS to disclose federal returns and return information:

++ To state tax agencies for tax administration purposes,

++ Under ex parte court orders for use in federal non-tax criminal

investigations and proceedings, and

++ As provided in other provisions of the law.

Certain limitations are placed on these disclosures. The provisions of the

law also require that agencies protect federal tax data by implementing

certain safeguards.

§6103(b) - Defines returns, return information, disclosure, state, tax

administration and other terms used in §6103.

Definition of Return

A return means any tax or information return, estimated tax declaration or

refund claim (including amendments, supplements, supporting schedules,

attachments or lists) required by or permitted under the Code and filed

with the IRS by, on behalf of, or with respect to any person. Examples of

returns include forms filed on paper or electronically, such as Forms 1040,

941, 1099, 1120 and W-2.

Definition of Return Information

The definition of return information is very broad. It includes, but is not

limited to:

++ Any information, besides the return itself, that IRS obtained from any

source or developed through any means that relates to the potential

liability of any person under the Code for any tax, penalty, interest, fine,

forfeiture, or other imposition or offense.

++ Information extracted from a return, including names of dependents, or

the location of business.

Additional resources are available for Governmental Liaisons on IRS.gov. Use

the search term “governmental liaison.”

++ Do not leave confidential tax information on computer screens when you

Penalties

++ Protect laptop computers and removable media that contain confidential

Be aware that you cannot access or disclose confidential tax information

unless a provision of the Code authorizes the access or disclosure.

Unauthorized disclosure or access could subject you to criminal penalties

under §7213 and §7213A (UNAX). A taxpayer may also seek civil damages

under §7431.

++ The taxpayer’s name, address and identification number.

++ Information collected by the IRS about any person’s tax affairs, even if

identifiers like name, address and identification number are deleted.

Criminal Penalties:

§7213 specifies that willful unauthorized disclosure of returns or return

information by an employee or former employee is a felony.

++

Whether a return was filed, is or will be examined or subject to other

investigation or processing, including collection activities.

The penalty can be a fine of up to $5,000 or up to five (5) years in jail, or

both, plus costs of prosecution.

++ Information contained on transcripts of accounts.

§6103(d) - is the statutory authority that allows disclosure of returns and

return information to state tax agencies for tax administration purposes.

Read more about safeguarding federal tax information and disclosure

limitations in Section 2.4 of Pub 1075.

Under §7213A, willful unauthorized access or inspection (UNAX) of taxpayer

records by an employee or former employee is a misdemeanor. This applies to

both paper documents and electronic information.

Violators can be subject to a fine of up to $1,000 and/or sentenced to up to

one year in prison.

§6103(i) – is the statutory authority that allows disclosure of returns and

return information as ordered by federal district courts upon application

by the United States Attorney and in other circumstances. Safeguarding

responsibilities of federal law enforcement agencies are discussed in

Section 5.12 of Pub 1075.

Civil Penalties:

A taxpayer whose return or return information has been knowingly or

negligently inspected or disclosed by an employee in violation of §6103 may

seek civil damages.

§6103(p) - is the statutory authority that requires certain recordkeeping

and safeguarding procedures for federal tax information.

§7431 allows a taxpayer to institute action in district court for damages

where there is unauthorized inspection or disclosure. If the court finds there

has been an unauthorized inspection or disclosure, the taxpayer may receive

damages of $1,000 for each unauthorized access or disclosure, or actual

damages, whichever is greater, plus punitive damages (in the case of willful

or gross negligence), and costs of the action (which may include attorney’s

fees).

Safeguards

Certain agencies receiving federal tax returns and return information must

protect them as explained in IRS Pub 1075. These agencies are identified

in §6103(p)(4) as are their recordkeeping, reporting, and safeguarding

requirements.

Resources for Safeguarding Tax

Information

IRS Publication 1075, Tax Information Security Guidelines For Federal,

State, and Local Agencies, the book that we commonly call “Pub 1075,” is

the definitive source for safeguard standards and procedures required to

protect federal tax records.

Pub 1075 provides a convenient resource for the letter of the law. Selected

sections of the statute and regulations are reprinted in Exhibits in the .pdf

version of the document, available online at www.IRS.gov.

There is no liability under §7431 if the disclosure was the result of a good

faith but erroneous interpretation of §6103.

Avoid Unauthorized Disclosure – Follow

These Tips:

are away from the computer workstation.

tax information.

++ Do not commingle data. Keep federal tax information separate from other

types of information. Where physical separation is impractical, the file

should be clearly labeled to indicate that the file contains federal tax

information.

++ Discuss confidential federal tax matters only with those personnel who

have a need to know the information for a tax administration purpose.

Do not discuss confidential tax matters on coffee breaks, at home or

outside the office.

++ Observe the clean desk policy. Do not leave confidential information

unattended on your desk.

++ Prepare all correspondence carefully. Be sure to completely over-write

the information added to any pattern letters you may be using. Review all

correspondence before sending to ensure that the text and all enclosed

materials (reports, attachments, schedules, and other inserts) are

intended for the recipient.

++ Use a document receipt to verify that confidential material has been

properly received when information is mailed or hand carried. Use double

sealed envelopes when mailing confidential tax information or take other

precautions to prevent viewing of actual content.

++ Sensitive information, regardless of its form (electronic information in any

form: e.g., on a hard drive, tape, disk, or other portable storage device,

paper records, video or audio recordings of any type and databases must

be protected from unauthorized disclosure.

++ Immediately report all unintentional or inadvertent unauthorized

disclosures of tax information to the IRS as directed by current procedures.

++ Immediately report willful unauthorized accesses or disclosures by calling

the TIGTA Hotline at 1-800-366-4484.

IRS Resources Available

++ IRS Safeguards staff periodically reviews agencies for compliance with

these requirements and receives and approves certain reports required

by law.

Protect confidential tax information:

++ IRS Governmental Liaison keeps the lines of communication and

++ Follow appropriate physical and information security guidelines at all times.

++ Dispose of confidential tax information appropriately, whether on paper

++ IRS Disclosure answers disclosure questions and concerns and supports

or digital media.

cooperation open and active with state tax and other agencies.

your agency liaison in the delivery of your Disclosure Awareness program.