In 1996 Congress added IRC 6103(e)(8) to the disclosure provisions allowing each spouse to access the collection account of a joint liability. The addition of this section and the complimentary section 6103(e)(9) regarding disclosure of information to jointly liable responsible officers of the Trust Fund Recovery Penalty filled a gap necessary to allow taxpayers to have a true picture of what they owe. Each of these two code subsections allows persons who share a liability to see the true picture of the account. In both instances the IRS seeks to collect the liability only once, even though it has the ability to collect from more than one liable person. If you are one of those persons, you want to know the true balance on the account in making decisions and not just the amount paid by you. Congress should pass a law allowing this type of disclosure anytime more than one person owes for a joint liability and not just in these two specific instances.
The Treasury Inspector General for Tax Administration (TIGTA) recently released a report in which it displayed the result of tests it performed to see how well IRS employees understood IRC 6103(e)(8). Basically, the IRS failed the test. I will discuss details below, explain more about these types of accounts and suggest some additional legislation. Before I provide that information, I want to make a quick observation regarding IRS employees and the disclosure laws.
Many IRS employees live in fear of the disclosure laws. Because they lack a clear understanding of the long and complex disclosure statute, because they must make snap decisions and because of the severe consequences of a wrong decision to disclose rather than to refuse, many IRS employees default to refusal to disclose even when they should provide the requested information. What is the consequence of refusal to disclose? The person asking must find someone else to ask or simply walk away empty handed. The employee refusing to disclose faces no penalty for the refusal, no reprimand from their supervisor, no civil or criminal penalty for giving out information they should not have given out.
We have a system in which IRS employees have learned the right answer is to follow Nancy Reagan’s advice – “Just say no.” The TIGTA report does not address the bureaucratic and systemic reasons that IRS employees refuse to disclose information they should disclose. It simply notes that they fail. If we seek a system in which IRS employees will do a better job in disclosing information they should disclose, a balance of consequences must exist. Until that happens all of the TIGTA reports telling us that IRS employees fail to follow the disclosure law provide little assistance.
We are entering the season in which TIGTA issues the annual reports required by Congress in 1998. Because TIGTA must issue reports on the same subject dictated in 1998 over and over again, it tries to be a little inventive and cover slightly different aspects of some of the subjects each year in order to avoid the groundhog day effect of reporting on the same thing over and over. Maybe it’s time for Congress to think about having them report on some different things or require some of the reports every two, three, four or five years apart rather than every year. I don’t think Congress has revisited the issue of these reports and I doubt if many people in Congress read the TIGTA reports. Would it be so hard to rethink how it uses TIGTA resources?
TIGTA tested both revenue officers (ROs) and employees at Automated Call Sites (ACS). You would expect that ROs would significantly outperform ACS employees because of the training and education requirements of ROs. The ROs did better but did not cover themselves in glory. TIGTA interviewed 12 ROs and 12 ACS employees asking about the ability to disclose information to the other spouse about a joint liability. TIGTA asked two questions. First, it asked if these IRS employees would disclose information to the spouse if the couple was married. Second, it asked the same question except in the circumstance in which the couple was divorced.
All of the IRS employees got it right if the couple remained married. All would have provided the information about the joint liability to either the H or the W. Only 8 of 12 ROs would provide the information if the couple was divorced and only 6 of 12 ACS employees would provide the information in that situation. The statute requires the disclosure of the information in both circumstances. The refusal to provide the information violates the taxpayer’s rights and places the taxpayer in an awkward situation – exactly what Congress tried to avoid in passing the provision.
When a couple takes certain divergent paths such as an innocent spouse request or one spouse, but not the other, filing a Tax Court petition or a bankruptcy case, the IRS master file changes their account transcript from one containing all of the data for one spouse to two mirrored accounts – one for each spouse. The now-separate accounts generally “mirror” each other but diverge with regard to tax adjustments made on only one spouse’s account after the mirroring (see IRM 220.127.116.11 for further detail). Per IRM 18.104.22.168, only certain information from a mirrored account (such as amount collected and current collection status) must be disclosed to a requesting spouse. The creation of the mirrored accounts tricks many practitioners and taxpayers who see the account transcript of the joint liability zeroed out and also leads the IRS employees down the wrong decision path in this situation when it comes to making a decision.
The problems with the IRS computer system need no explanation to regular readers of this blog or any description of the IRS. Mirroring accounts, apparently a creature of the IRS computer system, not only trick others but create an impression that may provide one of the causes for IRS collection employees to do so poorly on the TIGTA test regarding IRC 6103(e)(8). Would it be possible as the IRS continues to upgrade its computer systems to put a statement on joint accounts providing the reader with information that mirroring an account does not terminate the liability? Would it be possible to put some indication in the account transcripts that IRS employees can read instructing them that information on a mirrored account can be provided to both H & W, thereby giving the IRS employee a little help in understanding this somewhat counterintuitive disclosure provision?
Disclosure and Domestic Violence
One of the things a taxpayer can learn about their joint account is who has accessed it and when. Normally, providing this information seems appropriate; however, in a domestic violence situation it may create a bad situation. Since the passage of IRC 6103(e)(8) in 1996, we have made many strides in improving the situation for victims of domestic violence. DV victims can have a VODM (Victim of Domestic Violence) placed on their account by the innocent spouse unit which provides certain protections. Congress should provide an additional protection. It should not allow the other spouse to know when an inquiry regarding an account has occurred. This could provide needed protection to a VODM.