FOIA AND DIVORCE

Obtaining Information from the IRS
For
Domestic Relations Matters

by

Gary D. Borek

July - 1992

Introduction

In your representation of a client in a domestic relations matter you may need information from the Internal Revenue Service about your client or your client's spouse. You cannot obtain that information by simply writing or calling the IRS as the attorney for your client. The IRS will not respond to a state or federal court subpoena for the information. The obstacles you face in obtaining the information are not the result of bureaucratic red tape. Rather, they are the result of stringent anti-disclosure laws passed by Congress to protect against the dissemination of information possessed by the IRS.

The anti-disclosure laws of the Internal Revenue Code ("IRC") prohibit, with some exceptions, the dissemination of tax returns or tax return information by the Internal Revenue Service ("IRS"). Tax return information includes all information in possession of the IRS which is related to a particular taxpayer. The anti-disclosure laws contain civil and criminal penalties which apply to employees of the IRS as well as state employees and private tax return preparers. The IRS has an entire division devoted to enforcement and interpretation of the anti-disclosure law, and a full range of administrative remedies are available to resolve disputes over disclosure matters.

The IRS is also subject to the Freedom of Information Act ("FOIA"). The FOIA requires disclosure of all information possessed by a government agency unless prohibited from disclosure by another statute. The IRS believes that the anti-disclosure laws of the IRC override, and are independent of, the FOIA, thereby avoiding the procedural provisions of the FOIA. Most courts, however, have held that the anti-disclosure laws of the IRC are nothing more than substantive exceptions to the broad disclosure required under the FOIA and that the procedural provisions of the FOIA are applicable to requests for disclosure from the IRS.

The IRS has enacted regulations for application of the FOIA and the anti-disclosure laws of the IRC. Generally, the regulations under the FOIA are more favorable to those seeking disclosure than the regulations under the anti-disclosure laws of the IRC. Moreover, the FOIA places the burden of proof on the IRS if disclosure is denied. The anti-disclosure laws of the IRC do not contain a similar provision with respect to the burden of proof. Thus, those seeking disclosure should always do so under the Treasury Department regulations for the FOIA rather than those for the anti-disclosure law of the IRC, unless the possibility of a denial of the request is minimal.

Whether proceeding under the FOIA or the anti-disclosure law regulations, the IRC allows disclosure of tax returns and tax return information of a particular taxpayer to (1) the taxpayer; (2) an authorized representative, or (3) an authorized disclosure recipient. An "authorized representative" means any individual qualified to practice before the Internal Revenue Service who has been granted a power of attorney by the taxpayer with respect to the tax matters for which disclosure is sought. Generally, only attorneys, certified public accountants, enrolled agents, and enrolled actuaries are qualified to practice before the Internal Revenue Service. An "authorized recipient" includes any individual or entity authorized by the taxpayer to receive copies of the taxpayer's tax returns or tax return information. An authorized recipient, however, is not empowered to act on behalf of the taxpayer with respect to the tax matters subject to disclosure.

Power of Attorney:

The Treasury Regulations state that the IRS will accept any form of a power of attorney containing the necessary information. Use of the government's form (Form 2848), however, is the most efficient method of obtaining recognition as an authorized representative because: (1) many IRS employees incorrectly believe that you must use the government's form; and (2) the government's form must be used to have your status as the authorized representative recorded in the computerized central authorization file. You should use the most recent Form 2848. Forms 2848 bearing a revision date before March of 1991 are obsolete. Form 2848-D is also obsolete and has been replaced by Form 8821 as discussed below.

An unrestricted power of attorney may be granted only to an attorney, a certified public accountant, an enrolled agent, or an enrolled actuary. Other persons, however, may be granted a limited power of attorney. A tax return preparer may be designated as a power of attorney for representation of the taxpayer before the IRS Examination Division with respect to the return he or she prepared. The IRS also allows taxpayers to be represented before the examination division by an immediate family member, an officer of a corporation or other organization, a partner of a partnership, a trustee, receiver, guardian, administrator or executor of the corresponding entity, and a full-time employee of an individual or entity.

A single power of attorney can be submitted for both spouses with regard to a joint tax return. Individual powers of attorney must be submitted for each spouse if they are to be represented by different representatives. Although multiple representatives can be listed on one power of attorney, each representative must be an individual. The IRS will not recognize a firm, partnership, corporation, or other entity as a representative of the taxpayer.

The IRS Form 2848 Power of Attorney authorizes the representative to perform all acts which the taxpayer could perform with the respect to the specified taxes and tax periods, including the power to:
Represent the taxpayer before any office of the IRS.

Sign a waiver agreeing to a tax adjustment or an offer of waiver of restriction on assessment or collection of a tax deficiency, or a wavier of notice of disallowance of claim for credit or refund.

Sign a consent to extend the statutory time period for assessment or collection of a tax.

Sign a closing agreement under section 7121 of the Internal Revenue Code.

Receive, but not endorse or negotiate, a check drawn on the U.S. Treasury. (the taxpayer must specifically initial Form 2848 showing the name of the individual designated to receive the refund check to authorize such action).

Substitute a representative or delegate authority to a new representative if the act is specifically authorized under the power of attorney.

Sign employment tax returns.

Sign personal income tax return but only if:

The signature is permitted under the Internal Revenue Code and the related regulations (for example, the authority to sign income tax returns is governed by the provisions of section 1.6012-1(a)(5) of the Income Tax Regulations);

and

The authority to sign the income tax return is specifically granted in the power of attorney.


A power of attorney is generally terminated if the taxpayer becomes incapacitated or incompetent. The power of attorney will remain in effect after incapacity or incompetence if so stated on the power of attorney. A power of attorney can be revoked at any time by the taxpayer. The most recently filed power of attorney revokes all former powers of attorney unless otherwise stated on the most recently filed power of attorney. The IRS will continue to send notices and other information to the most recently authorized representative until the taxpayer revokes the representative's authority or the representative unilaterally informs the IRS that he or she is no longer representing the taxpayer before the IRS.

Disclosure Authorization:

Tax returns and tax return information can also be disclosed to an authorized recipient. The disclosure authorization must be signed by the taxpayer or his or her duly authorized power of attorney. IRS Form 8821 can be used to authorize the disclosure of information to a designated recipient. Form 8821, however, does not allow the designated recipient to represent the taxpayer before the Internal Revenue Service.

Form 8821 is similar to an authorization for release of medical records given to a defendant by a plaintiff. Form 8821 allows the authorized party to obtain the other party's tax returns or tax return information directly from the most reliable source - the IRS. If the other spouse's tax returns or tax return information is discoverable, but requests for such discovery have been ignored, then a discovery order requiring execution of the Form 8821 by the reluctant spouse should be sought.

Each spouse, or the authorized representative or disclosure recipient of each spouse, is entitled to all tax return or tax return information concerning a joint return filed by the spouses. Thus, a wife does not need to obtain a disclosure authorization from her former husband to obtain tax return information about any joint returns she has filed with her former husband. The IRS, however, believes that tax collection information is not covered by the joint return rules. Proposed legislation (the Taxpayer Bill of Rights 2) would require the IRS to disclose to either spouse the collection activity taken against the other spouse with respect to a joint liability. Until such legislation becomes law, Form 8821 must be signed by the adverse spouse before the other spouse can obtain collection information about the adverse spouse even with regard to a joint liability.

Service of a subpoena for production of the other spouse's tax returns or tax information upon the IRS is a waste of effort. Federal law prohibits the IRS and its employees from making an unauthorized disclosure. Sever penalties are imposed upon the agency and the employee for unauthorized disclosure. The Treasury Regulations instruct all IRS employees to absolutely refuse to disclose information, even when faced with a contempt citation threatened by a state or federal court. The United States Supreme Court has approved of those regulations. Any attempt to obtain disclosure from the IRS without proper authorization from the taxpayer will fail.

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