In the 1/14/03 edition of Tax Truth Newsletter we told our readers that American Rights Litigators (ARL) would likely be working with Richard Standring's organization, V.I.P. That's because they have been effective in getting IRS lien and levy notices removed. Eddie Kahn told us this week about a particular strategy used by V.I.P. that many of our readers will find. interesting.
According to Mr. Staidring. whenever the IRS sends out a Notice of Lien or Levy they violate privacy laws by giving out unauthorized tax information to the public.
For example, when the IRS files a Notice of Federal Tax Lien in the county recorder's office anybody in the world can go look at it, right? They could see everything on that Notice, including your name, social security number and the dollar amount of what the IRS claims you owe, etc.
However, according to 26 USC § 6103, it says that the IRS cannot disclose confidential information to the public unless they have your permission.
Therefore, Eddie looked in the procedural regulations under 26 CFR §301.6103 that relate to Section 6103 of the tax code. He found some very interesting reading there talking about how the IRS must have your written permission before they can disclose anything.
For example, one provision says, "Generally, information of a confidential nature can only be disclosed upon a taxpayer’s written authorization. IRM-1272 Disclosure of Official Information Handbook contains instructions relating to disclosure matters."
Even the IRS' criminal handbook talks about the same thing, according to Eddie; the IRS must have your permission. It says the agency cannot disclose a person's confidential information to any third party unless that person completes a Form 2848 or Form 8821. For reference, Form 2848 is the IRS' Power of Attorney and Declaration of Representative form.
Form 8821, entitled Tax Information Authorization, is the IRS' designated form for a person to authorize disclosure of their confidential information.
Based upon this knowledge, Mr.Standring told Eddie that V.I.P’s strategy is to do some sort of administrative action whenever the IRS issues a Notice of Lien or Levy. They declare that the IRS is in violation of Section 6103 of the tax code. At first, Eddie thought it was a lawsuit that V.I.P. filed, but he learned later from Mr. Standring that the strategy is administrative in nature.
However, there is a court case in Florida where this was an issue. A doctor sued the U.S. for unauthorized disclosure of information to his clients by an IRS Criminal Investigation Division (CID) agent.
The man. Dr. Reddy, won the case. Evidently, It was rather simple as there wasn’t much to the lawsuit, according to Eddie. The only thing the IRS disclosed when questioning his clients was his name, identification number and that Dr. Reddy was under investigation. Furthermore, they included a return envelope addressed to the CID in West Palm Beach, Florida. That was enough to cause a violation of Section 6103.
When you look at the definition of "return information", investigations and taxpayer identity are included as things the IRS cannot disclose. Yet, they did with Dr. Reddy.
The CID asked Dr. Reddy’s. clients questions of course, but that's not unauthorized disclosure. The unauthorized disclosure happened when they gave information to his clients.
What made this case interesting though was that after Dr. Reddy’s attorney filed the complaint, the US. attorney immediately capitulated. He admitted that what the IRS did was wrong without any resistance. Dr. Reddy didn't have to fight for it at all. Then the US. attorney put in a Rule 68 or 69 saying that the IRS was willing the settle for $1,000 per 126 clients involved, plus court costs and attorneys fees. That's all there was to it.
ARL has a complete copy of this case, US. vs. Reddy, available on a CD for $20 including shipping. If you would like to have a copy of it, then please send your payment to American Rights Litigators, 25525 State Road 46, Mount Plymouth, Florida 32776.
Eddie said he couldn’t see why suing the IRS for disclosing information an a Notice of Lien and Levy wouldn’t do as well as the Reddy case. It seems that it would make for an even stronger case than what the doctor had.
That's because the IRS always shows your name, ID number, alleged date of assessment, how much you supposedly owe, interest and penalties, etc.; they show everything. All of that is tax return information that you never authorized them to disclose.
Therefore, Eddie figures that if the IRS puts that information in the county records, then potentially everybody could see it. If there are one million people in the county, then that could mean an awful lot of money to you at $1,000 per person. You could always claim that everybody in the county potentially could see it. In reality, it's much more than that though because if the county records are online that means everybody in the world could see it. However, limiting your claim to just the county would keep things within some bounds of reason.
Nevertheless, Eddie thinks that it’s always bat to do administrative procedures first to seek a remedy, such as Mr. Standring’s administrative strategy. Then if the IRS doesn’t respond, you do a notarial protest to get an administrative judgment from the notary. If they still won't budge after that, then you could go into court where you will have an even stronger position. At that point. your judicial judgment against the IRS will be just a matter of form because you will already have the notary’s administrative judgment.
If you go into court though and the IRS doesn’t respond to the charge, then you will get a default judgment against them.
Let’s think about this for a moment. If the IRS filed a Notice of Lien on you in the county recorder’s office and you get a default judgment, then what would happen to that Notice of Lien? It would have to disappear from the county records. The county recorder would have to remove it because the default judgment would show that there was no basis for the IRS to disclose your confidential information. Therefore, the IRS had no authority to make that information available to the public since there was no court action.
If there was court action involved, however, then all of your information could and would be public record. Yet. they didn’t, so there is nothing that gives the IRS the right to disclose your private information without your consent.
Eddie thinks this idea of the IRS violating Section 6103 is a very clever way of attacking the IRS' Notice of Lien.
The argument has nothing to do with taxes or whether you owe the IRS any money; it's all about procedure.
The only issue in question is that you didn’t give the IRS the required written authorization to release your private information to the public. Even when the IRS sends out a Notice of Levy on someone who do they send it to? They send it to a person's employer or bank, which is the public.
Yet, the public doesn’t have a right to see your confidential information contained on it without a court action being initiated. Actually, the IRS is supposed to have a court ordered judgment before they can ever seize a person's property via a Notice of Levy.
Here is another nice thing about getting a default judgment against the IRS. Do you think the IRS will ever try to impose another Notice of Lien or Levy on you for the same tax year or other tax years?
They probably wouldn’t because if they ever did, then they would be in contempt of court. When you knock out the lien and levy the IRS has nothing to go on civilly. That applies to state revenue authorities too as they all piggyback off the IRS.
The bottom line is, there are two ways in which you can go after the IRS when they disclose your confidential information without your consent You can go after them civilly and/or criminally. 26 USC § 7431 shows us that the IRS is subject to civil penalties if they disclose your confidential information without your consent.
The criminal penalties are listed under 26 USC § 7213 and 18 USC S 1905. Then when you look at the Privacy Act it also says that you can go after then civilly and criminally. The criminal penalty is a misdemeanor count and a $5,000 fine for each offense. Therefore, there is nothing that we know of that would prevent a person from pursuing the IRS bath civilly and criminally. Eddie likes this because it gives you a double shot at them.
TITLE 26- INTERNAL REVENUE CODE
Subtitle F - Procedure and Administration
CHAPTER 61 - INFORMATION AND RETURNS
Subchapter B- Miscellaneous Provisions
Sec. 6103. Confidentiality and disclosure of returns and return Information
(a) General rule
Returns and return Information shall be confidential and except as authorized by this title.
(1) no officer or employee of the United states,
(2) no officer or employee of any State, any local child support enforcement agency or any local agency administering a program listed In subsection (I)(7)(D) who has or had access to returns or return information under this section, and
(3) no other person (or officer or employee thereof) who has or had access to returns or return Information under subsection (e)(1)(D)(iii), paragraph (6), (12), or (16) of subsection (I), paragraph (2) or (4)(B) of subsection (m), or subsection (n), shall disclose any return or return information obtained by him in any manner in connection with his service as such an officer or an employee or otherwise or under the provisions of this section. For purposes of this subsection, the term officer or employee includes a former officer or employee.
For purposes of the section -
The term return means any tax or Information return, declaration of estimated tax or claim for refund required by, or provided for or permitted under, the provisions of this title which is filed with the Secretary by, on behalf of, or with respect to any person, and any amendment or supplement thereto, Including supporting schedules, attachments, or lists which are supplemental to, or part of, the return so filed.
(2) Return Information
The term "return of information" means -
(A) a taxpayer’s Identity, the nature, source, or amount of his Income, payments, receipts, deductions.
exemptions, credits, assets, liabilities, net worth, tax liability, tax withheld, deficiencies, overassessments, or tax payments, whether the taxpayer’s return was, Is being, or will be examined or subject to other Investigation or processing, or any other data, received by, recorded by, prepared by, furnished to, or collected by the Secretary with respect to a return or with respect to the determination of the existence, or possible existence, of liability (or the amount thereof) of any person under this title for any tax, penalty. Interest, fine, forfeiture, or other imposition, or offense,
TITLE 26. INTERNAL REVENUE CODE
Subtitle F- Procedure and Administration
CHAPTER 76 - JUDICIAL PROCEEDINGS
Subchapter B- Proceedings by Taxpayers and Third Parties
Sec. 7431. Civil damages for unauthorized inspection or disclosure of return and return information
(a) In general
(1) Inspection or disclosure by employee of United States. If any officer or employee of the United States knowingly or by reason of negligence, Inspects or discloses any return or return information with respect to a taxpayer In violation of any provision of section 6103, such taxpayer may bring a civil action for damages against the United States In a district court of the United States.
In any action brought under subsection (a), upon a finding of liability on the part of the defendant, the defendant shall be liable to the plaintiff In an amount equal to the sum of -
(1) the greater of -
(A) $1,000 for each act of unauthorized inspection or disclosure of a return or return information with respect to which such defendant Is found liable, or
(B) the sum of -
(i) the actual damages sustained by the plaintiff as a result of such unauthorized inspection or disclosure, plus
(ii) In the case of a willful Inspection or disclosure or an Inspection or disclosure which is the result of gross negligence, punitive damages. plus
(2) the costs of the action plus
(3) In the case of a plaintiff which Is described In section 7430(c)(4)(A)(iii), reasonable attorneys fees, except that If the defendant Is the United States, may he awarded only if the plaintiff is the prevailing party (as determined under section 7430(c)(4)).
TITLE 26 - INTERNAL REVENUE CODE
Subtitle F - Procedure and Administration
CHAPTER 75 CRIMES, OTHER OFFENSES, AND FORFEITURES
Subchapter A - Crimes
PART 1 - GENERAL PROVISIONS
Section 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 offence.
(e) Cross references
(2) Penalties for disclosure of confidential Information. For penalties for disclosure of confidential information by any officer or employee of the United States or any department or agency thereof, see 18 U.S.C. 1905
TITLE 18 - CRIMES AND CRIMINAL PROCEDURE
PART 1 - CRIMES
CHAPTER 93- PUBLIC OFFICERS AND EMPLOYEES
Section 1905. Disclosure of confidential information generally
Whoever, being an officer or employee of the United States or of any department or agency thereof, any person acting on behalf of the Office of Federal Housing Enterprise Oversight, or agent of the Department of Justice as defined In the Antitrust Civil Process Act (15 U.S.C. 1311-1314), publishes, divulges, discloses, or makes known in any manner or to any extent not authorized by law any Information coming to him In the course of his employment or official duties or by reason of any examination or Investigation made by, or return, report or record made to or filed with, such department or agency or officer or employee thereof, which Information concerns or relates to the trade secrets, processes, operations, style of work, or apparatus, or to the Identity, confidential statistical data, amount or source of any Income, profits, losses, or expenditures of any person, firm. partnership, corporation, or association or permits any Income return or copy thereof or any book containing any abstract or particulars thereof to be seen or examined by any person except as provided by law shall be fined under this title, or Imprisoned not more than one year or both and shall be removed from office or employment.
Anyway, Eddie said that ARL definitely wants to do one of these Section 6103 actions so they can have experience testing it themselves.
It seems that the judges and the IRS pay attention to this issue for when have you ever seen the IRS capitulate as they did in the Reddy case. That's because it involves procedural error. In Eddie's experience, procedural error is something that he has always seen judges acknowledge.
IRS Shows Bill Of Exchange Payment As Bankruptcy Discharge
Eddie Kahn also told us this week about another interesting bit of information regarding how the IRS reflects bill of exchange payments in their records. It seems that when a person uses a bill of exchange to pay for an alleged IRS debt, the IRS shows the payment as a discharge through bankruptcy. American Rights Litigators (ARL) became aware of this alter reviewing the IRS’ Individual Master File (IMF) on one of their clients whom the IRS previously claimed to owe $900,000. The client became a became a creditor to his ‘strawman’ and used A bill of exchange to discharge the alleged $900,000 debt.
As such, ARL assumes that this is how and why the IRS zeroed out this client's tax account for the tax years in question. We believe the client whom Eddie referred to may have been the doctor that we wrote about in the 9/10/02 edition of Tax Truth Newsletter, Eddie found this bankruptcy discharge coding rather interesting.
On his personal IRS situation, the IRS was after Eddie not too long ago for the tax years 1986, 1987 and 1988. Therefore, he gave the IRS a bill of exchange for those three years to discharge the alleged tax debt. Then about three months later he got a letter from the IRS acknowledging their receipt of his correspondence. They said they would give him an answer within sixty days. One month after that, Eddie got a second letter from the IRS saying that they transferred the matter to the IRS office in Jacksonville, Florida. The only information they provided was a phone number.
Eddie called the phone number and discovered that it was the IRS’ bankruptcy division. Thus, it appears that the IRS is going to record Eddie's bill of exchange payment as a bankruptcy discharge as well. This lends further credence to the idea that a bankruptcy discharge is how the IRS enters a bill of exchange payment on their books. The IRS doesn’t show the account as paid, but rather as canceled out through bankruptcy.
Upon calling the number, Eddie talked to a man there who said that there was a specific woman who he needed to contact. Therefore, Eddie tried calling her several times so he could try to get some answers from her as to how the matter was in bankruptcy. However, he wasn’t able to make contact with her and to date she has not returned his call.
Eddie Kahn Sues American Rights Litigators And Bank
The last time we wrote about ARL's bankruptcy situation in the 2/11/02 edition of Tax Truth Newsletter we reported that the judge dismissed the case. Therefore, Eddie Kahn filed a lawsuit as a creditor against American Rights litigators (ARL) and the bank holding ARLs funds. Since that time the bank responded with a motion to dismiss Eddie's lawsuit The bank's attorney based his motion on the presumption that Eddie and ARL are one and the same person as the IRS' nominee levy implied last June. However, Eddie Kahn is and always has been a separate person from American Rights litigators.
To make this even more apparent, Eddie resigned from his position as executive trustee and general manager of ARL He just works there now as a consultant. In his lawsuit against ARL, Eddie claims that he is a secured party and ARL owes him consultant fees. Therefore, the money frozen in ARLs bank account is his. The bank position, however, is that the Internal Revenue Service is owed the money. Yet, so far the IRS has not come in as a party to Eddie’s lawsuit and submitted a claim. If the IRS doesn’t have a secured claim, then it doesn’t matter what the bank says.
Besides, the bank’s petition for a summary judgment from the court to dismiss the case is moot for another reason; there is a controversy. Eddie already discharged the debt that the IRS alleged in their nominee levy against ARL with a bill of exchange. This makes for two strikes against the bank which gives them a very weak position. It will be interesting to see how this all plays out Eddie said the court scheduled the first hearing on March 27, 2003