IRS Tax Tip 2021-34, March 22, 2021 promises each of us:
- Information a taxpayer gives the IRS won't be shared with outside parties, unless allowed by the taxpayer or by law. This is the right to confidentiality. It's one of ten rights known collectively as the Taxpayer Bill of Rights.
- The IRS won't give any information to a third party without permission from the taxpayer.
- The agency can't contact third parties such as an employer or bank for information unless they give the taxpayer reasonable notice first.
- The same confidentiality a taxpayer has with an attorney also applies to tax professionals working with the IRS on the taxpayer's behalf.
- Taxpayers have the right to expect appropriate action will be taken against employees, return preparers and others who wrongfully use or disclose taxpayer return information.
- Fall within the tax professional's authority to practice before the IRS, but it doesn't include tax return preparation.
- Are considered private or restricted between the taxpayer and their attorney.
- Relate to noncriminal tax matters with the IRS or noncriminal tax cases in federal court.
- Tax professionals can't share or use tax information for any reason other than preparing a return.
Some of the “revelations” were:
- In 2007, Jeff Bezos, then a multibillionaire and now the world’s richest man, did not pay a penny in federal income taxes. He repeated that feat in 2011.
- In 2018, Tesla founder Elon Musk, the second-richest person in the world, also paid no federal income taxes.
- Michael Bloomberg paid no federal income tax in recent years.
- Billionaire investor Carl Icahn twice paid no federal income tax.
- George Soros paid no federal income tax three years in a row.
- 25 people saw their net worth rise a collective $401 billion from 2014 to 2018. IRS data shows that they paid a total of $13.6 billion in federal income taxes in those five years. That’s a staggering sum, but it amounts to a true tax rate of only 3.4%.
- While evading the federal income tax is a crime, avoiding federal income taxes by taking advantage of provisions in the law is perfectly legal.
WHY THE LEAK OF THE TAX RETURNS IS VERY FRIGHTENING!
Many non-wealthy people routinely lose between 20 and 30 percent of their income to federal income taxes. They are naturally concerned when they see people who are wealthy enough to own private jets get away with paying little to nothing in taxes. This leak was intended to spark resentment, and it did.
Remember that the IRS promises taxpayers confidentiality regarding the information in their tax returns. That information is supposed to be disclosed only with the consent of the taxpayer, or as required by law. Was that the case here? Unfortunately, no.
These wealthy people had their confidential data disclosed because one or more people at the IRS had a political agenda. They decided that it was in the best interests of the country to stir up resentment against the uber-rich in order to make it easier for certain Members of Congress to advance their proposals to make the wealthy pay more.
Of course, the leaker committed a felony. Upon conviction, the responsible party can be sentenced to up to five years in prison. If that person was an IRS employee, he or she will be fired. Here is the applicable law:
26 U.S. Code § 7213 - Unauthorized disclosure of information
(a)Returns and return information
(1)Federal employees and other persons
It shall be unlawful for any officer or employee of the United States or any person described in section 6103(n) (or an officer or employee of any such person), or any former officer or employee, willfully to disclose to any person, except as authorized in this title, any return or return information (as defined in section 6103(b)). Any violation of this paragraph shall be a felony punishable upon conviction by a fine in any amount not exceeding $5,000, or imprisonment of not more than 5 years, or both, together with the costs of prosecution, and if such offense is committed by any officer or employee of the United States, he shall, in addition to any other punishment, be dismissed from office or discharged from employment upon conviction for such offense.
(2)State and other employees
It shall be unlawful for any person (not described in paragraph (1)) willfully to disclose to any person, except as authorized in this title, any return or return information (as defined in section 6103(b) acquired by him or another person under subsection (d), (i)(1)(C), (3)(B)(i), or (7)(A)(ii), (k)(10), (13), or (14), (l)(6), (7), (8), (9), (10), (12), (15), (16), (19), (20), or (21) or (m)(2), (4), (5), (6), or (7) of section 6103 or under section 6104(c). Any violation of this paragraph shall be a felony punishable by a fine in any amount not exceeding $5,000, or imprisonment of not more than 5 years, or both, together with the costs of prosecution.
(3)Other persons
It shall be unlawful for any person to whom any return or return information (as defined in section 6103(b)) is disclosed in a manner unauthorized by this title thereafter willfully to print or publish in any manner not provided by law any such return or return information. Any violation of this paragraph shall be a felony punishable by a fine in any amount not exceeding $5,000, or imprisonment of not more than 5 years, or both, together with the costs of prosecution.
(4)Solicitation
It shall be unlawful for any person willfully to offer any item of material value in exchange for any return or return information (as defined in section 6103(b)) and to receive as a result of such solicitation any such return or return information. Any violation of this paragraph shall be a felony punishable by a fine in any amount not exceeding $5,000, or imprisonment of not more than 5 years, or both, together with the costs of prosecution.
(5)Shareholders
It shall be unlawful for any person to whom a return or return information (as defined in section 6103(b)) is disclosed pursuant to the provisions of section 6103(e)(1)(D)(iii) willfully to disclose such return or return information in any manner not provided by law. Any violation of this paragraph shall be a felony punishable by a fine in any amount not to exceed $5,000, or imprisonment of not more than 5 years, or both, together with the costs of prosecution.
(b)Disclosure of operations of manufacturer or producer
Any officer or employee of the United States who divulges or makes known in any manner whatever not provided by law to any person the operations, style of work, or apparatus of any manufacturer or producer visited by him in the discharge of his official duties shall be guilty of a misdemeanor and, upon conviction thereof, shall be fined not more than $1,000, or imprisoned not more than 1 year, or both, together with the costs of prosecution; and the offender shall be dismissed from office or discharged from employment.
(c)Disclosures by certain delegates of Secretary
All provisions of law relating to the disclosure of information, and all provisions of law relating to penalties for unauthorized disclosure of information, which are applicable in respect of any function under this title when performed by an officer or employee of the Treasury Department are likewise applicable in respect of such function when performed by any person who is a “delegate” within the meaning of section 7701(a)(12)(B).
(d)Disclosure of software
Any person who willfully divulges or makes known software (as defined in section 7612(d)(1) to any person in violation of section 7612 shall be guilty of a felony and, upon conviction thereof, shall be fined not more than $5,000, or imprisoned not more than 5 years, or both, together with the costs of prosecution.
The Treasury Department released this statement regarding the situation:
“Treasury announced yesterday that they made investigative referrals to their Office of Inspector General as well as the FBI, and the United States Attorney’s Office for the District of Columbia,” Douglas O’Donnell, the IRS’s deputy commissioner for services and enforcement, told a House Ways and Means committee panel Thursday. “We fully support any investigation undertaken and will urge the investigative authorities to keep Congress appropriately informed of their findings.”
We hope the FBI will identify and charge the person or persons responsible for this leak. However, there is a good chance that there are some people within the FBI who don’t really want to expose the leakers because they agree with the leakers’ agenda. And unfortunately, we’ve seen what happens at the FBI when political considerations get in the way of enforcing the law.
To many in D.C., the laws should only apply to people who are not doing the right thing—in their opinion. If you are “doing the right thing”, even if it’s against the law, you should not be punished. So, look for a significant number of people in DC to favor taking no action against the leakers, even if the leakers are positively identified.
In a Wednesday June 9, 2021 blog, Kimberly Strassel, a writer for the Wall Street Journal, made these points:
- The ProPublica story was a moralizing snoozefest, thousands of words (and the threat of more installments) to explain that the U.S. tax code allows deductions for loan interest, charitable giving and business expenses, and that the nation’s elite actually use these deductions.
- Also, ProPublica informs us that people don’t pay tax on capital gains until they actually realize those gains.
- Still, the nation’s liberal and social media spent the week breathlessly pretending the story was a blockbuster exposé breaking the news that the wealthy don’t pay their “fair share”, while Democrats renewed their calls for higher taxes on the rich.
- For decades, the GOP has understood that the term “federal government employee” is increasingly interchangeable with “registered Democrat.”
- This cadre of civil servants have realized they can use their powers in ways that aid the political goals of Democrats.
- Think of Lois Lerner, the IRS functionary who for several years managed to deprive conservative nonprofits of their free-speech rights.
- The career bureaucrat’s tool of choice has become the leak.
- The leaks are becoming bigger and bolder because the leakers know there are few if any consequences.
The Internal Revenue Code clearly requires us to compile and file a federal income tax return every year. That return must disclose not just our total income, but all of our sources of income and even some information on how we spent our money.
How many of you would like to have your confidential tax return information leaked and published in the press? You say that would never happen to you because you are not a billionaire so no one would be particularly interested in your information.
Well, if they can leak the tax return information of the wealthiest people, and probably not be punished, what is going to stop them from leaking the income tax returns of anyone who donates to the Republican Party? What’s to stop leakers from targeting people based on their social media posts or for belonging to an organization that someone in the bureaucracy doesn’t like?
Like John Perry Barlow, a writer and lyricist for the Grateful Dead, said: Relying on the government to protect your privacy is like asking a peeping tom to install your window blinds.
It is just not possible to put in enough safeguards to prevent an activist bureaucrat from leaking information from someone’s tax return. However, there is a foolproof way to ensure that no one’s private tax return information will ever be disclosed against their will. Eliminate tax returns entirely. Pass the FAIRtax.
The FAIRtax is collected anonymously at the cash register on the retail purchase of new goods and services. There are no forms to file, and the government no longer has any legitimate need for any of your personal financial data.
We all need to remember the words of St. Thomas Aquinas, “To bear with patience wrongs done to oneself is a mark of perfection, but to bear with patience wrongs done to someone else is a mark of imperfection and even of actual sin”.
There’s only one way to eliminate the possibility that you will see all of your personal information on the internet--Pass the FAIRtax! To do anything less than demand passage of the FAIRtax is “a mark of imperfection and even of actual sin.”
If you have friends who don’t know about the FAIRtax, send them to FAIRtax.org. Have them watch the white boards under “How It Works” and, if they agree, ask them to please join us.
Then contact your Members of Congress and the President and demand that Congress pass -the FAIRtax—the only fair tax.
Remember, if we don't continue to tell the truth and demand a change, then this quote from George Orwell's 1984 may foretell our children's future:
“If you want a picture of the future, imagine a boot stamping on a human face—forever.”
Is it hopeless? When confronted with a seemingly impossible problem, remember the statement attributed to the author George Bernard Shaw who wrote, You see things; and you say “Why?” But I dream things that never were; and I say “Why not?”
Isn’t it time for us to ask, “Why not?”