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Safeguarding Taxpayer Information

Annual Disclosure Training for Fiscal Year 2012

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Outline

• Importance• Federal Laws and FTI• State Laws • AG Opinion• Disclosure, both authorized and

unauthorized• Guidelines for handling information• Questions

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Why is this important?High Ethical Standards Must be Maintained- Contractors of Collections Enforcement must

maintain high ethical standards because of their position of public trust. Maintaining the public trust is vital to the administration of a voluntary tax system. All the information included in this training is designed to protect you, the taxpayer, practitioners and the public.

- Federal and state tax information is confidential and cannot be accessed or disclosed by AGO employees except for official purposes. Federal and state criminal and civil laws apply to violations of disclosure laws.

Federal Laws and FTI

•FTI statutes•FTI and Ohio Department of Taxation•FTI and the AGO

Key TermsDisclosure – Making known to any person, in any manner

whatever, a return or return information.

Inspect or Browse – To view, in any manner whatever, a return or return information.

Return – Any tax or information return, declaration of estimated tax, or claim for refund required by, provided for, or permitted under the law, and any information derived therefrom.

Confidentiality Rule – Return information shall be confidential and, except for an official need and use, no employee shall disclose any return or return information obtained by him/her in any manner in connection with his/her service as an employee. The term “employee” includes former employees.

IRC Section 6103A Summary

IRC Section 6103 provides the general “confidentiality rule”, which is that taxpayers’ returns and return information shall only be used for official purposes and shall not be subject to unauthorized disclosure.

The entire code section is provided here. You are responsible for complying with the entire code section, but if you are already familiar with it, you are not required to read it every year to satisfactorily complete this training.

IRC Section 7213A Summary

IRC Section 7213 provides that willful unauthorized disclosure by state employees is a felony punishable by a fine not exceeding $5,000.00 or imprisonment not more than 5 years, or both, together with the cost of prosecution.

The entire code section is provided here. You are responsible for complying with the entire code section, but if you are already familiar with it, you are not required to read it every year to satisfactorily complete this training.

IRC Section 7213AA Summary

IRC Section 7213A provides additional misdemeanor penalties of 1 year in prison/$1,000.00 fine for “browsing.” - “Browsing” is the unauthorized

inspection of return information.

The entire code section is provided here. You are responsible for complying with the entire code section, but if you are already familiar with it, you are not required to read it every year to satisfactorily complete this training.

IRC Section 7431A Summary

IRC Section 7431 allows taxpayers to sue state employees who make unauthorized disclosure of a return or return information, with damages up to $1,000.00 for each act of unauthorized disclosure, plus the cost of suing. Taxpayers have 2 years from the date they discover the unauthorized disclosure to bring suit. There are two defenses which state employees can use in a suit under this section:

1. The disclosure resulted from a good faith, although erroneous, interpretation of IRC 6103; or

2. The disclosure was requested by the taxpayer.

The entire code section is provided here. You are responsible for complying with the entire code section, but if you are already familiar with it, you are not required to read it every year to satisfactorily complete this training.

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Cases Under the Internal Revenue Code• U.S. v. Richey, 924 F.2d 857 9th Cir.

(Wash.),1991. Former IRS agent on trial for filing fraudulent returns discloses prior audit of trial judge.

• Barrett v. U.S., 51 F.3d 475, 5th Cir.(Tex.) 1995. IRS agent investigating physician who pocketed cash receipts sent 380 letters to former patients asking amounts paid for services.

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• Siddiqui v. United States, 359 F.3d 1200  (2004) At his retirement dinner attended by 100 people, IRS agent (in an attempt at humor) gave a colleague a baseball cap, and said, “Here’s a piece of evidence you missed when raiding ______’s house”. The cap was embroidered with the name of a taxpayer who was then being criminally investigated, and the words “Internal Revenue Code 7201,” which relate to criminal tax evasion. The taxpayer’s defense attorney was one of the guests present. He jumped up and called out, “Section 7206(1)”, which relates to false statements.

Cases Under the Internal Revenue Code

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Flow of Tax Information

Collections Enforcement Section

Special Counsel/ TPV

Returned or destroyed pursuant to IRS Publication 1075

FTI and Ohio Department of Taxation• IRS information regarding Ohio

taxpayers is used to:– Update Ohio income tax master file,

including names, addresses, dates of death.

– Compare to Ohio income tax roster to generate delinquent (non-filer) assessments.

– Compare to Ohio income tax returns to generate FAGI, RAR, CP2000 assessments.

• IRS information regarding Ohio corporations is used to:– Update Ohio corporation tax master file.– Compare to Ohio income tax returns to

generate net income assessments. • Additionally, IRS information

regarding Ohio individuals is used to:– Identify and locate persons who are

personally liable as “responsible parties” for unpaid sales tax or withholding tax.

FTI and the AGO

• Federal Tax Information (FTI) within AG systems:– Information contained on the TOPs payment

tapes and reports derived therefrom• Includes TOPs payments posted to the account

– PIT100 source codes• 13: the name, mailing address, SSN of the taxpayer,

Ohio tax due, tax year, and the source code• 18: Ohio tax due, tax year, and the source code• 21: Ohio tax due, tax year, and the source code• 29: Ohio tax due, tax year, and the source code

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Treasury Offset ProgramThe Treasury Offset Program (TOPs) was begun in Ohio in

2001. Under this program, IRS refunds are intercepted from taxpayers owing Ohio income tax debts from tax years within the past decade.

In the next few months, the TOPs program will be expanded to intercept IRS refunds and apply them to UC Tax Benefits—Fraud claims.

State Income Tax Levy Program (SITLP) The mirror of TOPs is SITLP, which was begun in ODT in

2002. Under this program, IRS debts are offset against Ohio income tax refunds.

Treasury Offset Program

Data regarding TOPs offsets is FTI. This includes the following:– Data on the TOPs offset file: name,

address, SSN, and federal refund amount

– The posting of the payment on the CUBS account: the DTN, amount, and “TOP” designation

– Any report derived therefrom

State Tax Laws

All tax information, whether federal or state taxes, is deemed

confidential under state law.

Ohio Revised Code (ORC) General ProvisionsThe general prohibition against divulging tax information is found in the

Ohio Revised Code Section 5703.21. This section applied to all ODT employees, all AGO employees who handle ODT matters, and all Ohio taxes.

… no agent at the Department of Taxation, except in his report to the Department or when called on to testify in any court or proceeding, shall divulge information acquired by him as to the transactions, property or business of any person while acting or claiming to act under orders of the Department. Whoever violates this provision shall thereafter be disqualified from acting as an officer or employee or in any other capacity under appointment or employment of the Department.

This statute prohibits employees from releasing taxpayer information to anyone outside the Department, or outside those acting as agents for the Department, even if the outsider is a union representative, employee of another state agency, or the employee’s attorney.

Ohio Revised Code Section 5715.50 extends the prohibition to former employees.

ORC Specific Taxes

At a minimum, you should review the tax or system that is specific to your daily job duties. However, you are strongly encouraged to review all information.

Personal Property Tax

Revised Code 5711.101 provides that the balance sheets and other financial statements submitted along with personal property tax returns are not public records, but are confidential documents for the use of ODT only in assessing taxable property.

Estate Tax

Revised Code 5731.90 provides that estate tax returns and supporting documents are confidential. Information in such records may not be released except on order of a probate court.

Corporate Franchise Tax

Revised Code 5733.03(G) provides that any information gained as a result of corporate franchise tax returns, investigations, hearings, or verifications is confidential and may not be disclosed except in the performance of an employee's official duties, or upon the order of a court. However, R.C. 5715.50 permits the disclosure of the names and addresses of the statutory agents of corporations, and the names of corporate officers and directors.

Sales/Use Tax

Revised Code 5739.35 prohibits employees from divulging any information acquired as a result of any investigation pursuant to the sales tax chapter, except as may be required by the Commissioner or by a court. Revised Code 5741.24 provides a similar prohibition regarding use tax.

Personal Income Tax

Revised Code 5747.18(C) specifies that any information gained as the result of returns, investigations, hearings, or verifications required or authorized by Chapter 57 is confidential, and no person shall disclose such information, except for official purposes, as provided under statute, or in accordance with a proper judicial order.

Ohio Attorney General Opinion 90-102

Contains strongly persuasive public policy arguments that tax returns and filings ought to be confidential are present. As stated in In re Hampers, 651 F.2d 19, 21 (1st Cir.1981), the public policy is stressed in the "long standing confidential nature of state tax returns, an attribute conferred on such data by many...states, said to be a critical factor in stimulating voluntary compliance with the tax laws."

Disclosure

Authorized and Unauthorized

Disclosure

You must always be aware of potential disclosure problems in your dealings with taxpayers, practitioners, the news media, elected officials, government representatives, and the public in general.

If you are uncertain whether or not to disclose tax return and payment information, DO NOT DISCLOSE. Ask your supervisor for assistance or refer the inquiry to your supervisor.

How to Handle Taxpayer RequestsGeneral Rule – After verifying ID, we can provide

taxpayers with their own returns & records.

Walk-ins – After verifying the taxpayer’s ID, we can provide taxpayer with copies of his/her own returns and records.

Written Requests – If an individual submits a signed, written request for their own returns and/or records, we can mail/fax the copies to the taxpayer at the address/fax number they provide after verifying signature, if possible. For businesses, estates, etc, a principal/officer/administrator must sign the request.

How to Handle Taxpayer Requests

Telephone Requests – We can mail requested information to the taxpayer’s current address as shown on CUBS. We can provide taxpayer information over the telephone if we make sure we are talking to the taxpayer by verifying the taxpayer’s name, address, account/SSN and additional tax information (such as refund amount, assessment amount) with what is shown on the system.

Email Requests – For an email request with scanned signature, we respond the same as we do to a written request. Emails without signature are generally treated the same as telephone requests.

How to Handle Representative RequestsGeneral Rule – We need a completed Form TBOR-1 before

we can release information. In all cases where it is a problem for the representative to provide a completed TBOR-1, we can mail the requested information to the taxpayer (at the address on CUBS) and the taxpayer can give it to the representative.

Walk-in Representatives – We need a completed TBOR-1 before we can release copies of returns or printouts of taxpayer information. However, we can provide limited verbal information (see Telephone Request by Representatives).

Written Requests by Representatives – We need a completed TBOR-1 before we can release copies of returns or printouts of taxpayer information. (Some exceptions)

How to Handle Representative Requests

Telephone Requests by Representatives – Taxpayer information may be given verbally to a representative over the phone if the representative is able to verify his authority to represent the taxpayer by giving us the taxpayer’s name, address, account number, and the particulars of the situation the representative is inquiring about, such as refund amount, assessment amount, etc.

Email Requests by Representatives – Have the representative complete and return a TBOR-1. (This may be done by email.)

How to Handle Miscellaneous RequestsRequests for Taxpayer Information from the News

Media, Government Agencies, Elected Officials, or the General Public – General Rule – Refer requests from the media to Traci Saliba or Dan Tharp.

Requests from the IRS or other states – Refer to Disclosure Officer: Lindsey McCarron, (614) 466-6252.

Subpoenas for tax return information – If you receive a subpoena for tax information, forward to the AGO.

TBOR-1

The TBOR-1 Form, “Authorization of Representative”, is to be completed by a taxpayer who wants the AGO to provide information to a third party representative. If the taxpayer only wants the third party to receive copies but does not intend for the third party to be his/her representative, the taxpayer can so indicate in the “Restrictions” section of the TBOR-1. TBOR-1s are to be noted in the system and scanned to the account.

Vendor’s License InformationSenate Bill 200, effective 9/6/2002,

provides that ODT employees and agents may disclose to the public the name, location, license number, and status of vendors.

Reporting Improper Inspections or Disclosures

Upon discovering a possible improper inspection or disclosure of FTI, including breaches and security incidents, by a state employee or any other person, the individual making the observation or receiving information must contact the Disclosure Officer, who will then contact the Chicago office of the Special Agent-in-Charge, Treasury Inspector General for Tax Administration (TIGTA) and the IRS.

Reporting Improper Inspections or Disclosures• TGITA - Chicago

– Phone: (312) 886-0620 X 104– Mailing Address:

Treasury Inspector General for Tax Administration

Ben Franklin StationP.O. Box 589Washington, DC 20044-0589

– Hotline Number: (800) 589-3718– Web Site: www.treas.gov/tigta

Reporting Improper Inspections or Disclosures• IRS – To notify the IRS Office of Safeguards, the agency should

document the specifics of the incident known at the time into a Data Incident Report, including but not limited to:– Name of Agency and agency point of contact for resolving data

incident with their contact information– Date and time of the incident– Date and time the incident was discovered– How the incident was discovered– Description of the incident and the data involved. Include specific data

elements if known.– Potential number of FTI records involved. If unknown, provide a range if

possible.– Address where the incident occurred– Information technology involved– DO NOT include any FTI in the Data Incident Report

Send the Data Incident Report to the SafegaurdReports@IRS.gov mailbox. Reports should be sent electronically and encrypted via IRS approved encryption techniques. Use the term “Data Incident Report” in the subject line of the email.

Reporting Improper Inspections or Disclosures

Incident Response Timeframes– Immediately, but within 24 hours.

If FTI may have been involved, do not wait to investigate.

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Guidance on Safeguarding Taxpayer Information

IRS Publication 1075, available at IRS.gov

Guidance on Safeguarding Taxpayer Information

Protecting Federal Tax Information: Pocket Guide for Government Employees

Available at www.irs.gov/pub/irs-pdf/

p4761.pdf

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Some Guidelines:

• Document the receipt, storage and return or destruction of information.

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Some Guidelines:

• Keep confidential tax information in a separate file, stored away when not in use.

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Some Guidelines:

• Tax information should be in a locked cabinet behind two locked doors.

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Some Guidelines:

• Only persons with a proper business NEED and USE for the information should have access.

Some Guidelines:

• Always lock your computer when you leave your workstation.

Some Guidelines:

• Questions? Ask the Disclosure Officer.

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Questions

A taxpayer calls requesting information regarding a lien that showed up on his credit report. He has the Judgment Lien Number used by the County Clerk of Courts and he has a dollar amount. He wants to know what the lien is for. He doesn’t have any idea what it could be for. Besides the assessment associated with the lien, there are several non-certified assessments on ITAS. What should the AG Collection Enforcement representative do?

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What if, instead of the situation described in the previous question, an attorney calls?

Questions

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Regarding the previous question, what if the attorney is one you have worked with frequently before?

Questions

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A partnership files a sales tax return without payment, and this results in an assessment. A year later, after the break-up of the partnership, one partner comes into the AG/CE office to get a copy of all documents related to the assessment because the partners are not on speaking terms and he cannot obtain a copy from the other partners. Can we provide the documents?

Questions

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A vendor has given his accountant a power of attorney to act for him in regard to assessment #12345 which covers the period July-December, 2004. In researching this assessment, you see uncertified assessment #67890 against this vendor for November, 2004. Can you inform the accountant of assessment #67890 ? What should you do?

Questions

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If you walk away from your work station computer at the taxpayer interview area and someone other than a Tax Department or AG employee sees taxpayer information on the screen, have you committed a disclosure violation? – What if a Tax Department or AG employee

is the one who sees the information on the screen? Is there a disclosure violation?

Questions

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An AG employee is handling a FAGI assessment against a Cincinnati Reds pitcher. The employee is surprised to see how much this particular pitcher is paid, and he mentions this to a co-employee sitting in the next cubicle. Is this a disclosure violation?

Questions

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The AG employee from the previous question is researching on ITAS and happens to notice that his neighbor has a vendor’s license. She notices that the neighbor’s middle name is “Igor”. Later, at a neighborhood Halloween party, she asks the guests if they can guess who “the real Igor” is. Is this a disclosure violation?

Questions

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Comments / Questions