TAXPAYER PRIVACY

A Guide for Screening 

and Assessing 

Proposals to Disclose 

Confidential Tax 

Information to 

Specific Parties for 

Specific Purposes

Report to Congressional Requesters

December 2011

GAO-12-231SP

United States Government Accountability Office

GAO
Page i GAO-12-231SP Taxpayer Privacy Guide

Letter 1 

Laws Protecting FTI Confidentiality 3

How This Guide Was Developed 5

How to Use This Guide 6

Threshold Questions for Screening Section 6103 Exception 

Proposals 10

Policy-Factor Questions for Further Consideration of Section 6103 

Proposals 15

Appendix I Internal Revenue Code Section 6103—Current Taxpayer Confidentiality 

and Disclosure Provisions, and Safeguard and Record-Keeping 

Requirements 26

Appendix II The Fair Information Practices 29

Appendix III Compilation of Guide Questions 31

Appendix IV GAO Contact and Staff Acknowledgments 33

Glossary 34

Bibliography 36

Tables

Table 1: Summary of IRC Section 6103 Exceptions to the General 

Rule of Tax-Return and Return-Information Confidentiality 26

Table 2: The Fair Information Practices 30

Figures

Figure 1: Definitions of Tax Return and Tax-Return Information 3

Contents
Page ii GAO-12-231SP Taxpayer Privacy Guide

Figure 2: Threshold and Policy-Factor Questions for Assessing Any 

Proposal to Disclose Confidential Tax Information 8

Abbreviations 

FTI federal tax information

IRC Internal Revenue Code

IRS Internal Revenue Service

JCT Joint Committee on Taxation

OECD Organisation for Economic Co-operation and Development

Treasury Department of the Treasury

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Page 1 GAO-12-231SP Taxpayer Privacy Guide

United States Government Accountability Office

Washington, DC 20548

December 14, 2011

The Honorable Max Baucus

Chairman

The Honorable Orrin G. Hatch

Ranking Member

Committee on Finance

The Honorable Charles E. Grassley

Ranking Member

Committee on the Judiciary

United States Senate

The Internal Revenue Service (IRS) receives a great deal of personal 

information about individuals and businesses. While taxpayers are 

required to provide this information to IRS under penalty of fine or 

imprisonment, confidentiality of information reported to IRS is widely held 

to be a critical element of taxpayers’ willingness to provide information to 

IRS and comply with the tax laws. As a general rule, anything reported to 

IRS is held in strict confidence—Internal Revenue Code (IRC) Section 

6103 provides that federal tax information is confidential and to be used 

to administer federal tax laws except as otherwise specifically authorized 

by law.

Although tax information is confidential, nondisclosure of such information 

is not absolute. Section 6103 contains some statutory exceptions, 

including instances where Congress determined that the value of using 

tax information for nontax purposes outweighs the general policy of 

confidentiality. Since making amendments to Section 6103 in 1976, 

Congress has expanded the statutory exceptions under which specified 

taxpayer information can be disclosed to specific parties for specific 

purposes. Today, Section 6103 exceptions enable law enforcement 

agencies to use relevant tax information to investigate and prosecute tax 

and nontax crimes and allow federal and state agencies to use it to verify 

eligibility for need-based programs and collect child support, among other 

uses.

Periodically, new exceptions to the general confidentiality rule are 

proposed, and some in the tax community have expressed concern that 

allowing more disclosures would significantly erode privacy and could 

compromise taxpayer compliance. In evaluating such proposals, it is 

important that Congress consider both the benefits expected from a 

 
 

Page 2 GAO-12-231SP Taxpayer Privacy Guide

disclosure of federal tax information and the expected costs, including 

reduced taxpayer privacy, risk of inappropriate disclosure, and negative 

effects on tax compliance and tax-system administration. This guide, 

prepared at your request, is intended to facilitate consistent assessment 

of proposals to grant or modify Section 6103 exceptions. This guide 

consists of key questions that can help in (1) screening a proposal for 

basic facts and (2) identifying policy factors to consider. A description of 

how we developed this guide begins on p. 5.

As agreed with your offices, unless you publicly announce the contents of 

this guide earlier, we plan no further distribution until 30 days from the 

report date. At that time, we will send copies to interested congressional 

committees, the Director of the Office of Management and Budget, 

Secretary of the Treasury, Commissioner of Internal Revenue, and other 

interested parties. In addition, the guide will be available at no charge on 

the GAO website at http://www.gao.gov. 

If you have any questions about this guide, please contact me at (202) 

512-9110 or brostekm@gao.gov. Contact points for our Offices of 

Congressional Relations and Public Affairs may be found on the last page 

of this report. Key contributors to this guide are listed in appendix IV.

Michael Brostek

Director

Strategic Issues
 

Page 3 GAO-12-231SP Taxpayer Privacy Guide

Federal tax information (FTI)—tax returns and return information (as 

defined in fig. 1 below)—is kept confidential under Section 6103 of the 

IRC except as specifically authorized by law. Information in a form that 

cannot be associated with or otherwise identify, directly or indirectly, a 

particular taxpayer is not FTI. Section 6103 specifies what FTI can be 

disclosed, to whom, and for what purpose.1 Prior to passage of Section 

6103 amendments in the Tax Reform Act in 1976, the executive branch 

had discretion over decisions to share taxpayer information. The 1976 

amendments were written to address concerns about the potential for too 

much dissemination of tax information and the misuse of tax information.2

Figure 1: Definitions of Tax Return and Tax-Return Information

In general, FTI is collected and developed to administer tax law. This 

information, however, can be useful for other purposes, such as to detect 

possible noncompliance with nontax criminal laws or administer other 

kinds of government programs. In 1976 and since, Congress has granted 

 

1

This report focuses on potential exceptions in Section 6103 that would enable IRS to 

disclose a taxpayer’s information to a third party without the taxpayer’s authorization. This 

report is not focused on disclosures made by IRS to a third party at the request or consent 

of the taxpayer whose information is to be disclosed. 

2

The history of Section 6103 has been discussed in many previous reports. Please see 

the selected bibliography at the end of this report.

Laws Protecting FTI

Confidentiality 
 

Page 4 GAO-12-231SP Taxpayer Privacy Guide

some statutory exceptions to confidentiality and repealed or modified 

certain existing exceptions. Congress also has considered but not 

enacted other proposals. Congress has generally attempted to balance 

the expectation of taxpayer privacy with the competing policy goals of 

efficient use of government resources, the public health and welfare, and 

law enforcement. Exceptions to the general rule of confidentiality can be 

very narrowly prescribed. For example, for the purpose of determining 

creditworthiness for a federal loan, the law authorizes the IRS to disclose 

to a federal agency whether or not a loan applicant has a delinquent tax 

debt, but not more information than that.3 The law grants more-general 

disclosures of FTI to state tax agencies for the administration of state 

taxes. Additionally, Section 6103 authorizes disclosures for nontax 

administration purposes to specific entities such as certain congressional 

committees or the President or for specific purposes such as statistical 

use or determining eligibility for federal programs.4

The last comprehensive reviews of the Section 6103 framework were 

done more than a decade ago when the IRS Reform and Restructuring 

Act of 1998 required the Joint Committee on Taxation (JCT) and the 

Secretary of the Department of the Treasury (Treasury) to report to 

Congress on the scope and use of Section 6103 provisions regarding 

taxpayer confidentiality. In their reports, JCT and Treasury called for strict 

scrutiny of proposed exceptions and the circumstances when such 

exceptions should be made. 

Appendix I has more 

information on the current exceptions to FTI confidentiality, including 

safeguard and reporting requirements.

5

 

3

26 U.S.C. 6103(l)(3).

4

Properly authorized GAO employees also have access to FTI used in federal agencies’ 

programs or activities. Such access is granted by congressional committees with 

jurisdiction over tax matters on a case-by-case basis. In such cases, FTI may be disclosed 

to only those GAO employees who have a need to examine the information in the 

performance of their official duties and responsibilities as necessary to audit the selected 

federal program or activity. 

5

Joint Committee on Taxation, Study Of Present-Law Taxpayer Confidentiality And 

Disclosure Provisions As Required By Section 3802 Of The Internal Revenue Service 

Restructuring And Reform Act Of 1998, vols. 1-3 (Washington, D.C.: January 2000); and 

Department of the Treasury, Report to the Congress on Scope and Use of Taxpayer 

Confidentiality and Disclosure Provisions, vol. 1, “Study of General Provisions” 

(Washington, D.C.: October 2000). 
 

Page 5 GAO-12-231SP Taxpayer Privacy Guide

To identify what criteria or other policy factors Congress might wish to 

consider when deciding whether to grant exceptions to the general rule of 

tax information confidentiality, we reviewed

• Treasury and JCT reports;

• congressional reports and hearing records dated between 1999 

through April 2011 with references to Section 6103, including 

proposals enacted and not enacted;

• available research on the effect of tax-information confidentiality on 

voluntary tax compliance;6

• Treasury and IRS criteria used in assessing proposals to disclose tax 

information for nontax purposes,7

• the Fair Information Practices; and

• GAO internal guidance for recommendations on using tax data for 

nontax purposes.

The Fair Information Practices were a key basis for this guide. First 

proposed in 1973 by a U.S. government advisory committee, the Fair 

Information Practices are now widely accepted and, with some variation, 

the basis of privacy laws and related policies in the United States and 

many countries. They are also reflected in a variety of federal-agency 

policy statements on information privacy. The Fair Information Practices 

are not precise legal requirements. Rather, they provide a framework of 

principles for balancing the need for privacy with other public policy 

interests, such as national security, law enforcement, and administrative 

efficiency. Included in the practices is the principle that the collection and 

use of data should be limited to specific purposes and that individuals 

should have ready means of learning about the collection and use of 

information about them. Appendix II has more information on the Fair 

Information Practices.

We drafted guide questions and revised them based on feedback from 

Treasury, IRS, JCT, and the National Taxpayer Advocate as well as 

parties representing tax practitioners, privacy advocates, and private-

 

6

Voluntary compliance refers to the reliance of the income tax system, in part, on 

taxpayers reporting and paying their taxes as required with no direct enforcement and 

minimal interaction with the government.

7

IRS’s 1994 memorandum republished in app. B of Treasury’s 2000 report elaborates on 

these criteria. 

How This Guide Was 

Developed 
 

Page 6 GAO-12-231SP Taxpayer Privacy Guide

sector business concerns.8

We conducted our work from December 2010 to December 2011 in 

accordance with all sections of GAO’s Quality Assurance Framework that 

are relevant to our objectives. The framework requires that we plan and 

perform the engagement to obtain sufficient and appropriate evidence to 

meet our stated objectives and to discuss any limitations in our work. We 

believe that the information and data obtained, and the analysis 

conducted, provide a reasonable basis for any findings and conclusions.

We selected them to get views from parties 

that represent different perspectives and with expertise in tax 

administration, privacy, and information issues. We provided a draft of 

this guide to officials from Treasury and IRS for comment regarding facts 

and incorporated their comments as appropriate.

This guide was developed to assist and inform decision making regarding 

proposed statutory exceptions to tax information confidentiality or 

modifications to existing exceptions. It is intended to help policymakers 

think about important factors and competing interests rather than to 

provide a single right answer or optimal decision.

The guide consists of two sections of key questions for evaluating Section 

6103 exception proposals, as shown in figure 2. The first section includes 

five threshold questions for screening proposals to address basic issues, 

such as whether they are adequately developed and tailored to minimize 

disclosure of confidential tax information. Under this framework, all of the 

threshold questions would be resolved with a “yes” answer before further 

consideration of the proposal. The second section includes six policyfactor questions that explore the proposal’s expected benefits and costs,9

 

8

Parties included the American Civil Liberties Union, American Institute of Certified Public 

Accountants, Center for Democracy and Technology, Consumer Data Industry 

Association, Robert Gellman (privacy and information policy consultant), National 

Association of Enrolled Agents, and National Association of Tax Professionals.

privacy effect and safeguards, and effects on the tax system. Generally 

the policy questions deal with issues of magnitude, or “how much.” These 

9

The Office of Management Budget (OMB) provides guidance on conducting cost-benefit 

economic analysis that can be used to systematically assess program or policy options to 

maximize benefits achieved with resources used. Although this guide uses the terms 

benefits and costs, these terms are used generally as broad categories of, respectively, 

desired and undesired effects of a given proposal, not as defined and used in cost-benefit 

economic analysis. 

How to Use This 

Guide 
 

Page 7 GAO-12-231SP Taxpayer Privacy Guide

questions help identify trade-offs to consider among policy factors as well 

as potential risks to mitigate. In summary, the questions and their 

answers are intended to support a determination of whether approving 

the confidentiality exception is the best alternative. The order of the 

threshold and policy questions reflects a logical sequence of important 

issues that should all be given careful consideration. Appendix III is a full 

list of the threshold and policy-factor questions and subquestions 

discussed throughout the body of the guide.
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Figure 2: Threshold and Policy-Factor Questions for Assessing Any Proposal to Disclose 

Confidential Tax Information Interactive graphic

Page 8 GAO-12-231SP Taxpayer Privacy Guide

Print instructions To print text version of this graphic, go to appendix III.

Privacy effect and safeguards Effects on the tax system

Source: GAO.

Expected benefits and costs

Directions:

Mouseover the following threshold and policy-factor questions to reveal important subcategory questions to 

consider.
 

Page 9 GAO-12-231SP Taxpayer Privacy Guide

The guide is intended both for evaluating FTI disclosure proposals having 

an expected tax benefit or tax-specific use as well as proposals for other 

types of benefits or uses not directly related to tax administration.

Whether proposed uses, particularly disclosures for uses beyond tax 

administration, are seen as appropriate depends in part on how one 

views the role of tax information held by IRS. Some have advocated that 

FTI should be used only for tax administration and not disclosed outside 

of IRS. Others believe that FTI should be used as any other government 

information resource to achieve non-tax-related policy ends. In between 

these two positions is the view that FTI disclosures are acceptable in 

some cases but must be well justified. Regardless of one’s view, the 

questions in this guide are designed to support evaluating the relevant 

important taxpayer privacy rights, tax-system effects, and other key 

issues raised by proposals to disclose FTI. This guide may also assist 

Congress with oversight of existing exceptions to confidentiality under 

Section 6103.

Evaluating a proposal to use tax information will likely involve 

considerable judgment because objective information about likely effects 

may not be available. Therefore when developing and assessing an FTI 

disclosure proposal, it would be beneficial to build in mechanisms, such 

as performance reporting requirements, to assess the exception after it is 

implemented. It would, of course, be appropriate to weigh the cost of 

complying with any such reporting requirements against the expected 

value of the reports.
 

Page 10 GAO-12-231SP Taxpayer Privacy Guide

Threshold Question 1: Does the proposal have a clear purpose and 

description of how the tax information will be used?

The first step in answering the threshold and policy-factor questions is to 

have a clear description of basic elements of the exception proposal and 

its intended purpose. The description should detail the following:

• What specific information will be disclosed?

• To whom will the information be disclosed?

• What category or categories of taxpayers will be affected?

• How will the information be used?

• What purpose will be achieved?

Threshold Questions 

for Screening Section 

6103 Exception 

Proposals 
 

Page 11 GAO-12-231SP Taxpayer Privacy Guide

Threshold Question 2: Does the proposal consider reasonable 

alternatives?

Any disclosure of tax information comes with costs and creates risks.

These are discussed in detail in the policy-factor questions below. In 

order to consider a proposal, however, it is important that such 

consideration be done in light of any reasonable alternatives. Assessing a 

proposal’s alternatives could involve a separate evaluation of the 

alternatives using this guide, though much of this framework is specific to 

FTI disclosures.

One alternative for some proposals may be to obtain the information 

through taxpayer consent, as permitted under Section 6103(c). For 

example, when applying for home loans, taxpayers often consent to have 

income information from their tax returns disclosed to a mortgage 

company for verification. These disclosures are not subject to the 

safeguards otherwise required by Section 6103 as a condition for entities 

to receive tax information from IRS. However, other restrictions on the 

information may apply, such as the Privacy Act in the case of federal 

agencies receiving tax information pursuant to taxpayer consent. The 

Section 6103 safeguard requirements are discussed later in the 

safeguards policy-factor question and in appendix I.
 

Page 12 GAO-12-231SP Taxpayer Privacy Guide

Threshold Question 3: Is the tax information accurate, complete, and 

current enough for the stated purpose?

Any proposal to disclose and use FTI depends on the information being 

accurate and complete enough to use and available when it is needed.

One challenge related to disclosure proposals stems from the errors that 

tax information can contain. Information reported to IRS by tax filers and 

third parties is not always accurate. IRS may also introduce errors when 

processing the information, for example when transcribing tax information 

from paper returns. IRS finds and corrects some errors in the course of its 

return processing and examination processes, but not all of them.

Consideration should also be given to whether tax information is 

sufficiently complete for the stated purpose. Certain groups are 

underrepresented in IRS tax data because not everyone is required to file 

income-tax returns. For tax year 2010, single people under the age of 65 

earning less than $9,350, and married people both under the age of 65 

jointly earning less than $18,700, were not required to file tax returns.

Also, some individuals and businesses that are supposed to file returns 

fail to do so.

Additionally, tax information should be sufficiently current for the stated 

purpose when first used and for any later uses. Some FTI is only 

available for use outside of IRS after a lag time of more than a year. 

Taxpayers’ tax returns and information from third parties are generally 
 

Page 13 GAO-12-231SP Taxpayer Privacy Guide

provided to the IRS after a tax year, and the information provided may be 

as much as 17 months old. IRS processing then takes more time, 

including time to go back to tax filers and third parties to correct errors 

that IRS catches during processing. Taxpayers can also obtain deadline 

extensions of up to 6 months. For some proposed uses of FTI, these time 

lags could make FTI insufficiently current. A proposal’s limits on how long 

information can be used—to potentially include controls such as retention 

limits—may address any concerns about disclosed information becoming 

outdated for later use.

Threshold Question 4: Is the tax information to be disclosed relevant 

and the minimum needed to achieve the stated purpose?

A key consideration of any proposal is whether the information to be 

shared is clearly relevant to the proposed use. Only truly needed 

information should be disclosed, so a proposal should be tailored to 

ensure that each discrete element of information to be disclosed is 

relevant and necessary to accomplish the stated purpose. Minimizing the 

information disclosed to only that which is necessary can yield desirable 

results across several of the policy factors addressed elsewhere in this 

document, including reducing the costs of the disclosure (policy-factor 

question 2), preventing an unwarranted invasion of privacy (policy-factor 

question 3), or reducing the risk of unauthorized disclosure or use (policyfactor question 4). Such consideration is evident in IRS’s implementation 

of the privacy exception that provides for public disclosure of certain 

information about payment agreements between IRS and persons settling 
 

Page 14 GAO-12-231SP Taxpayer Privacy Guide

a tax debt for less than the full amount. While the name of the person 

entering into the agreement is disclosed, the Internal Revenue Manual 

requires that tax identification numbers, addresses, and certain other 

information be redacted.

Threshold Question 5: Does the proposal address any other statutory, 

regulatory, or logistical issues necessary for its implementation?

• Will the proposal require additional legislation besides modifying 

section 6103 to accomplish the desired result?

• Does the proposal conflict with existing regulations, rules, or statutes 

other than Section 6103?

• How will any logistical or practical barriers or hindrances to 

implementing the proposed disclosure and use of information for the 

stated purpose be resolved?

Changes to Section 6103 protections may not be the only changes 

needed to implement the proposed use of FTI. Other needed changes 

can be legal or logistical and may cause the proposal to be unnecessarily 

difficult, costly, or even impossible to implement. For example, other 

statutes, regulations, or practices may restrict or preclude the disclosure, 

access, and use of FTI for the stated purpose. Furthermore, agencies 

may not have systems or staffing in place to make use of the information. 

Also, agency practices might preclude the specified use. For example, if 

an agency uses contractors to do program work that would require 

handling of the disclosed tax information, then the proposal would have to 

address not only disclosure to agency employees but also to contractors.
 

Page 15 GAO-12-231SP Taxpayer Privacy Guide

Identifying all needed statutory, work-process, and information-flow 

changes can help assure that all the steps necessary to implement the 

proposal are clearly spelled out.

After an FTI disclosure proposal has been screened with the threshold 

questions (and each of the thresholds has been met), the proposal’s 

costs and benefits can be systematically assessed using the policy-factor 

questions below. Although they are discussed separately, policy 

questions may be interrelated. For example, a proposal may mean that 

IRS has to devote more resources to oversee FTI safeguards, which 

could potentially affect other aspects of tax administration (policy-factor 

question 6). Also, the significance of each issue discussed below likely 

will vary for any given FTI disclosure proposal.

Policy-Factor Question 1: What are the expected benefits of the 

proposal to disclose tax information?

• What are the estimated financial benefits, if any, to be achieved by 

using tax data?

• What are the nonfinancial benefits that are expected, if any?

A proposal could involve anticipated financial benefits such as saving 

money by reducing improper payments or making better decisions about 

government-backed loans. A proposal could also have nonfinancial 

benefits, such as improving the accuracy or reliability of government 

Policy-Factor 

Questions for Further 

Consideration of 

Section 6103 

Proposals 

Expected Benefits and 

Costs 
 

Page 16 GAO-12-231SP Taxpayer Privacy Guide

statistical information. Some proposals may include a combination of 

financial and nonfinancial benefits. For example, a previous FTI 

disclosure proposal involved disclosing FTI to the Department of 

Education to streamline the application process for federal financial aid 

for postsecondary education. This proposal was intended to reduce the 

Department of Education’s application-processing burden and improper 

payments related to inaccurate income reporting on the financial-aid 

application. The benefits were also expected to extend to families and 

schools that participated in the financial-aid programs by simplifying the 

application process.

To the extent possible, a proposal should specify and quantify its 

expected benefits. Benefits may include positive effects on voluntary 

compliance or tax administration, which are discussed specifically in 

questions five and six below.

Policy-Factor Question 2: What are the expected costs of obtaining and 

using the tax information to be disclosed?

• What are the estimated costs for IRS to provide the tax data?

• What are the estimated costs to the entity receiving the information?

• What are the expected costs for others affected by the tax-disclosure 

proposal?

Policymakers need to be able to consider all of the expected financial 

costs associated with the proposed use of FTI. Such costs would likely 

include costs to IRS, such as those for compiling and transmitting the 

data, as well as for accounting for the disclosures and providing oversight 

to ensure that the recipient of the data has the necessary safeguards in 

place to protect taxpayer information, ensure confidentiality, and prevent 

misuse. Section 6103 outlines the recordkeeping, safeguarding, reporting, 
 

Page 17 GAO-12-231SP Taxpayer Privacy Guide

and IRS oversight requirements that are conditions for receiving returns 

and return information.10 Costs to IRS would also depend on whether 

IRS’s current processes and information systems are capable of providing 

the requested information or if changes are needed to implement the 

proposal. For the entity receiving the information, a key consideration is 

the cost of establishing and maintaining the previously mentioned 

safeguards—a condition for any entity to receive tax information. To the 

extent that any entities besides IRS and the recipient of the FTI are 

involved, costs to those entities should also be addressed. For example, if 

the proposal involves changes to third-party reporting by financial 

institutions, the cost of meeting the new requirements should be a part of 

the benefit/cost discussion. Other costs may include negative effects on 

voluntary compliance or tax administration, which are discussed 

specifically in questions five and six below.

The benefits of privacy may be less tangible and immediate than the 

benefits of disclosing information to support some other purposes such as 

national security or law enforcement. As a result, in some cases, privacy 

may be at an inherent disadvantage when decision makers weigh privacy 

against other interests. Therefore, focused, systematic consideration of 

privacy is critical in assessing a proposal to disclose tax information.

Safeguarding the disclosed FTI is an important aspect of protecting 

privacy.

 

10Section 6103(p)(3), and Section 6103(p)(4). These requirements are also described in 

IRS Publication 1075, Tax Information Security Guidelines For Federal, State, and Local 

Agencies. Under Section 6103(p)(3)(B), IRS is required to annually report an accounting 

for disclosures to the JCT. Additionally, IRS is required to submit a public report on 

disclosure to JCT under Section 6103(p)(3)(C).

Privacy Effect and 

Safeguards
 

Page 18 GAO-12-231SP Taxpayer Privacy Guide

Policy-Factor Question 3: What is the potential effect on privacy?

• To what extent will the proposal adversely affect taxpayer privacy?

• Is the use of the information transparent and limited?

• Will sufficient notice and control be provided to individuals?

A key consideration for any FTI disclosure proposal is how much it will 

adversely affect privacy. Decision makers should know how many 

taxpayers will be involved, how much and what type of information will be 

disclosed, how sensitive the information is, who outside of IRS is going 

see that information, and the extent to which the disclosure and use of the 

information may adversely affect people’s privacy or other interests. 

Making a determination about the extent of an adverse impact involves 

assessing how well a proposal conforms to the Fair Information Practices. 

As addressed in threshold questions 1 and 4, such an assessment is 

needed to ensure that the proposal

• has a clearly specified purpose,

• minimizes the amount of information to be disclosed, and

• limits use of the disclosed information to the specified purpose.

The Fair Information Practices state that the public should be informed 

about privacy policies and practices and that individuals should have a 

ready means of learning about the use of their personal information. This 

is particularly important when the government is involved. The Fair 

Information Practices say it is important to ensure that information 

collected for one government function is not used indiscriminately for 

other, unrelated functions. Furthermore, the practices say that collection 

of personal information should be performed, where appropriate, with the 

knowledge or consent of the individual. Additionally, the practices say that 

it is important that there be transparency about how information is 
 

Page 19 GAO-12-231SP Taxpayer Privacy Guide

protected and that limits are placed on what information the government 

maintains.

Because tax information is generally recognized as being collected and 

developed to administer tax laws, its use for other purposes needs to be 

transparent. It should be clear what the government is doing with FTI and 

what limits will be placed on how the receiving entity may use the 

information. It is also important that taxpayers receive notice about the 

use of their information. Therefore, decision makers should determine if 

the proposal does these things adequately. On the basis of the practices, 

specific questions to consider, where appropriate, include the following:

• Will taxpayers be given sufficient, timely notice of the FTI disclosure 

and use?

• Will taxpayers be given the opportunity to disallow the disclosure?

• Will sufficient procedures be in place to give taxpayers access to the 

disclosed information, opportunities to correct any inaccurate 

information, and notification of access and correction procedures?

• Will sufficient notice be given to affected taxpayers regarding privacy 

policies and practices, such as the safeguards that will be in place for 

disclosed information, including security, retention, and disposal?

As noted earlier, the practices are not precise legal requirements; rather, 

they provide a framework of principles for balancing the need for privacy 

with other public-policy interests. Therefore the above questions—such 

as whether to provide taxpayers notice of, and opportunity to disallow, a 

disclosure—will not necessarily lead to such procedures in all cases. The 

privacy benefits of giving taxpayers prior notice or control over the 

disclosures would need to be justified in light of possible program risks or 

costs of such procedures. For example, it may not be appropriate to 

inform taxpayers that FTI about them is being used in a criminal 

investigation. It also may not be useful to report all disclosures to federal 

agencies for statistical or audit and evaluation purposes.

Means already exist to implement Fair Information Practices for uses of 

FTI. For example, the Section 6103 legal framework itself—by which only 

Congress can authorize use of tax information for other purposes—is part 

of the controls to prevent indiscriminate use of FTI for other purposes.

Moreover, openness about how FTI is used and protected is addressed 

through publicly available information about Section 6103 and FTI 
 

Page 20 GAO-12-231SP Taxpayer Privacy Guide

safeguards, including the content of the law itself. In addition, publications 

specifically about IRS privacy practices and the safeguards afforded FTI 

are available from IRS.11

Policy-Factor Question 4: What risks of improper use or unauthorized 

disclosure does the proposal create and how well does the proposal 

address those risks?

IRS also provides general notices about how the 

information provided by taxpayers can be used. For example, in the 

instructions for the widely used Form 1040, IRS refers to its authority to 

disclose tax returns and return information to others and provides several 

examples of such uses.

• Does the proposal adequately take into account risks of unauthorized 

use or redisclosure associated with the disclosure?

• Does the proposal provide adequate safeguards to mitigate those 

risks? 

Fair Information Practices call for reasonable security safeguards against 

risks such as loss or unauthorized access, destruction, use, modification, 

or disclosure. According to the internal control standards for the federal 

government, no matter how well designed and operated, no system of 

controls can provide absolute assurance that an objective will be met—in 

this case, that information is perfectly safe from improper use or 

unauthorized disclosure—so assessment and mitigation of risk is critical 

 

11For example, Internal Revenue Service, Tax Information Security Guidelines For 

Federal, State and Local Agencies, Publication 1075 (Washington, D.C.: August 2010); 

and Disclosure and Privacy Law Reference Guide, Publication 4639 (Washington, D.C.: 

September 2011).
 

Page 21 GAO-12-231SP Taxpayer Privacy Guide

to providing reasonable assurance that the disclosed FTI will be 

protected.12

Section 6103 and IRS Publication 1075 specify the safeguard 

requirements that entities receiving tax information must have in place to 

prevent the information from being misused, that is, used for an 

unauthorized purpose, or disclosed without authorization.

Another important risk consideration involves data mining or 

other techniques that may allow someone to merge different sets of 

seemingly anonymous, aggregated data to identify specific individuals.

Policymakers should consider how well the proposed use of FTI 

addresses the risks of improper use or unauthorized disclosure that could 

be created if the proposal is adopted.

13 Agencies that 

receive FTI are required to maintain a permanent system of standardized 

records on the use and disclosure of the information, store the information 

in a secure area, restrict access to the tax information, and properly 

dispose of the information after use. To further reduce the risk of misuse 

or unauthorized disclosure, a proposal may require that the tax 

information be returned to IRS or destroyed after it is no longer useful or 

after a set period. Safeguards are subject to periodic IRS review.

The expected benefits and costs associated with an FTI disclosure 

proposal were discussed previously under the policy-factor questions 

concerning expected benefits and costs. The potential effects on 

voluntary compliance and tax administration, discussed here, may 

represent either benefits or costs. Because continued willingness of 

taxpayers to provide their personal information is critical to voluntary 

compliance and tax administration, any proposed disclosure’s effect on 

such willingness warrants specific consideration.

 

12GAO, Standards for Internal Control in the Federal Government, GAO/AIMD-00-21.3.1 

(Washington, D.C.: November 1999).

13Section 6103(p)(4). Criminal and civil sanctions that apply to the unauthorized 

disclosure and inspection of tax information are under separate sections of the Internal 

Revenue Code (IRC §§ 7213 and IRC §§ 7431, respectively); and are generally described 

in Internal Revenue Service Publication 1075. Additional requirements include those of the 

Federal Information Security Management Act of 2002.

Effects on the Tax System
 

Page 22 GAO-12-231SP Taxpayer Privacy Guide

Policy-Factor Question 5: What is the potential effect on voluntary 

taxpayer compliance?

• What is the potential effect on voluntary compliance by taxpayers 

whose tax information will be disclosed?

• What is the potential effect on general voluntary compliance for other 

taxpayers?

Tax information is collected and developed for the primary purpose of tax 

administration. Some in the tax community are concerned that granting 

exceptions to confidentiality could compromise voluntary taxpayer 

compliance. Voluntary compliance happens when a taxpayer files tax 

form(s) on time that accurately report tax liability and, if applicable, pays 

on time the amount of tax due as required by the Internal Revenue Code. 

Disclosures of tax information can have a range of voluntary compliance 

effects, either positive or negative (as a benefit or a cost, respectively), so 

a proposal should be subject to a systematic consideration of possible 

voluntary compliance effects. Some proposals may enhance voluntary 

compliance. For example, if participation in a federal program is 

contingent on past compliance with the tax laws, people may be 

encouraged to stay compliant. Negative compliance effects are also 

possible. For example, people may think twice about filing a tax return or 

properly reporting all of their income if they know that the information may 

be used by an agency besides IRS in a way that they believe will 

disadvantage them.

The positive or negative effects on voluntary compliance may be limited 

to the individuals whose tax information is disclosed by IRS, or it may 

have broader effects on taxpayers in general. One possible general effect 

of increased use of FTI by entities other than IRS could be a sense 
 

Page 23 GAO-12-231SP Taxpayer Privacy Guide

among taxpayers that the information reported to IRS is not kept private, 

so providing information to IRS is a bad idea. For example, according to 

IRS research, nonfiling of tax returns increased after Treasury began to 

offset tax refunds to collect nontax debts owed to the government.14

Limited research is available on the relationship between tax-information 

confidentiality and voluntary tax compliance. Voluntary compliance is 

complex and it may not be possible to pinpoint the effects of existing 

disclosures or future effects of proposed new ones. Moreover, each 

proposal is likely to have unique potential effects on voluntary 

compliance. Therefore, a proposal should include a careful assessment of 

potential effects on voluntary compliance for the directly affected 

taxpayers and taxpayers in general. Such information could include, for 

example

On 

the other hand, when IRS contacts third parties for information regarding 

suspected hidden income or assets, it necessarily discloses that there is 

some sort of tax law enforcement action in process. When taxpayers are 

aware that such disclosures may occur, they may be more likely to 

comply with the tax laws because they feel they have a greater chance of 

being caught if they do not comply.

• the number of taxpayers affected,

• the number and types of tax returns that might not be filed or might be 

filed inaccurately and resulting types and amounts of information that 

might not be reported or be reported inaccurately, and

• the revenue effect of such noncompliance.

Because of uncertainty about a given proposal’s effect, such quantitative 

data could be estimated as a range of potential effects.

 

14As reported in Department of the Treasury, Report to the Congress on Scope and Use 

of Taxpayer Confidentiality and Disclosure Provisions. Tax-refund offsets involve 

disclosure of FTI because the entity receiving the offset funds sees information about the 

taxpayer whose refund was offset, namely that the taxpayer was owed a refund. 
 

Page 24 GAO-12-231SP Taxpayer Privacy Guide

Policy-Factor Question 6: What is the potential effect on tax 

administration?

• How much will implementing the proposal affect current IRS activities 

or performance?

• How much will any related safeguard responsibilities add to IRS’s 

current responsibilities?

As with effects on voluntary compliance, disclosures of tax information 

can negatively or positively affect tax administration. In most cases, it is 

likely that a proposal to provide information will place more 

responsibilities on IRS or otherwise increase the agency’s workload. Even 

if IRS has the data on hand and transmitting them would be simple, IRS 

will incur some cost to provide the information. Costs will be greater in the 

likely event that IRS will have to take special steps to extract the 

information and establish detailed transmittal protocols. If IRS needs to 

verify the information or correct errors before transmitting it, then the 

burden on IRS will be even greater. In addition, IRS will likely be 

responsible for ensuring that the receiving entity has adequate 

safeguards in place (as discussed in policy-factor question 4), and this 

will also require IRS staff time and other resources. All of these potential 

uses of IRS resources will mean either additional funding needs for IRS 

or the diversion of resources from other functions, perhaps resulting in 

adverse effects in other areas.

Effects on IRS’s operations are not necessarily negative. The expected 

benefits of some proposals may include improved service or enforcement 

on the part of IRS. For example, one existing disclosure exception 

authorizes IRS to publish in newspapers the names of taxpayers who are 

owed refunds but that IRS cannot locate. In this case, the disclosure may 
 

Page 25 GAO-12-231SP Taxpayer Privacy Guide

help IRS fulfill a part of its mission and save money because the agency 

does not have to take more-costly steps to locate these taxpayers.
Appendix I: Internal Revenue Code Section 

6103—Current Taxpayer Confidentiality and 

Disclosure Provisions, and Safeguard and 

Record-Keeping Requirements

Page 26 GAO-12-231SP Taxpayer Privacy Guide

Under Internal Revenue Code (IRC) § 6103, tax returns and tax-return 

information are confidential and may not to be disclosed unless 

specifically authorized. However, Congress has enacted some exceptions 

to confidentiality. Table 1, below, provides a high-level description of 

current exceptions and where they are found in IRC § 6103.1

Table 1: Summary of IRC Section 6103 Exceptions to the General Rule of Tax-Return and Return-Information Confidentiality 

IRC subsection Description

6103(c) Disclosure to taxpayer’s designees with taxpayer’s consent; provides access for anyone the taxpayer 

designates, although the Internal Revenue Service (IRS) has the authority to withhold the information if it 

determines that such disclosure would seriously impair federal tax administration.

6103(d) Disclosure to states and regional income-tax agencies for the purpose of administration of tax laws and for 

carrying out combined federal and state employment-tax-reporting programs. 

6103(e) Provides for individuals’ access to their own tax information and access for persons with material interest, for 

example, a spouse, a partner in a partnership, the administrator or executor of an estate, or an attorney 

authorized by the taxpayer.

6103(f) Disclosure to committees of Congress and their agents; includes GAO.

6103(g) Disclosure to the President and designated employees of the Office of the President, upon written request 

signed by the President personally. The request shall include the specific reason why the inspection or 

disclosure is requested, and the President shall file a report with the Joint Committee on Taxation (JCT) 

quarterly disclosing such requests.

Authorized representatives of the President or head of any federal agency may request a tax-compliance 

check for prospective appointees.

6103(h) Disclosure for the purpose of tax administration to certain federal officers and employees, including the 

Departments of the Treasury and Justice.

6103(i) Disclosure to federal employees for administration of nontax laws, including access to returns and return 

information for use in federal criminal investigations by order from a federal judge; return information from a 

source other than the taxpayer or taxpayer’s representative can be disclosed without a judicial order; allowing 

for disclosure to apprise appropriate officials of criminal or terrorist activities or emergency circumstances; and 

disclosure to locate fugitives from justice. 

 

1

The disclosure of certain returns and return information of tax-exempt organizations, 

trusts claiming charitable deductions, and certain pension plans are under IRC § 6104. 

The disclosure of certain written determinations and related background information are 

under IRC § 6110. However, information identifying the taxpayer is redacted from the 

document before it is released pursuant to Section 6110. Some subsections include 

authorization for the Social Security Administration to disclose tax-related information, for 

example wage information from employers contained in W-2 Wage and Income Statement 

forms.

Appendix I: Internal Revenue Code Section 

6103—Current Taxpayer Confidentiality and 

Disclosure Provisions, and Safeguard and 

Record-Keeping Requirements

Current Taxpayer 

Confidentiality and 

Disclosure Provisions
Appendix I: Internal Revenue Code Section 

6103—Current Taxpayer Confidentiality and 

Disclosure Provisions, and Safeguard and 

Record-Keeping Requirements

Page 27 GAO-12-231SP Taxpayer Privacy Guide

IRC subsection Description

6103(j) Disclosure for statistical use by the Bureau of Census and the Bureau of Economic Analysis of the Department 

of Commerce; Bureau of Economics of the Federal Trade Commission to administer economic surveys of 

corporations; Department of the Treasury for preparing economic or financial forecasts, projects, analyses, and 

statistical studies and related activities; Department of Agriculture for the Census of Agriculture; and the 

Congressional Budget Office for the long-term models of the Social Security and Medicare programs. Under 

this provision, returns and return information are not disclosed in a form that can be associated with or identify 

a particular taxpayer.

6103(k) Disclosure for certain miscellaneous tax-administration purposes, including disclosure of accepted offers-incompromise; disclosure to foreign governments under an income-tax convention or bilateral agreement; 

disclosure to state agencies regulating tax preparers; and disclosure to the Financial Management Service for 

levies on certain government payments. 

6103(l) Disclosure for purposes other than tax administration, including disclosure to the Social Security 

Administration, disclosure that an applicant for a federal loan has a delinquent tax account; disclosure to 

federal, state, and local child-support agencies, and disclosure for the administration of the Medicare and 

Medicaid programs.

6103(m) Disclosure of taxpayer-identity information to the media to notify persons entitled to a tax refund when the 

Secretary of the Treasury has been otherwise unable to locate the taxpayer.

Disclosure of the mailing address of a taxpayer to certain federal agencies when necessary, including a federal 

agency trying to collect or compromise on a federal claim against the taxpayer; the National Institute for 

Occupational Safety and Health for locating individuals who are or may have been exposed to occupational 

health hazards; and the Department of Education or Department of Health and Human Services for locating a 

taxpayer who has defaulted on student loans.

6103(n) Disclosure to contractors maintaining systems for processing and storing tax information for tax-administration 

purposes.

6103(o) Disclosure with respect to taxes on tobacco, firearms, and explosives to officers and employees of the agency 

whose official duties require such inspection or disclosure; and disclosure with respect to taxes on wagering.

Source: GAO.

Of the 7 billion disclosures reported in the annual public-disclosure report 

for calendar year 2010, 99 percent were disclosed under three 

provisions—about 60 percent (over 4 billion disclosures) were made to 

state government officials for tax-administration purposes; about 21 

percent (nearly 1.5 billion disclosures) were made to congressional 

committees and their agents, including disclosures to GAO; and about 18 

percent (almost 1.3 billion disclosures) were made to the Bureau of the 

Census. According to the Internal Revenue Service (IRS), some 

disclosure provisions are rarely or never exercised.
Appendix I: Internal Revenue Code Section 

6103—Current Taxpayer Confidentiality and 

Disclosure Provisions, and Safeguard and 

Record-Keeping Requirements

Page 28 GAO-12-231SP Taxpayer Privacy Guide

To safeguard taxpayer privacy and ensure confidentially, Section 6103 

imposes the following requirements for government entities receiving 

returns and return information from IRS:2

• establish and maintain a permanent system of standardized records 

of requests including the reason for such requests, date of requests, 

and any disclosures;

• establish and maintain a secure area for storage;

• restrict access to the information to only those whose duties or 

responsibilities require access and those to whom disclosures are 

permitted under section 6103; 

• establish and maintain any other safeguards IRS deems necessary or 

appropriate;

• provide IRS a report describing the safeguard procedures; and

• dispose of the information in an appropriate manner after use.

Some disclosure provisions are exempted from the safeguard 

requirements including disclosures to the taxpayer of his or her tax 

information, to persons with a material interest, and to third parties for 

whom the taxpayer has consented to the disclosure. Also exempted are 

public disclosures (for example, agreements between IRS and persons 

settling a tax debt for less than the full amount) and disclosures limited to 

the taxpayer’s mailing address.

IRC 6103 also requires record keeping for accountability and oversight. 

IRS is required to keep records of disclosures made under certain 

provisions and account for their volumes in a required annual report to the 

Joint Committee on Taxation (JCT), which in turn issues an annual report 

for public inspection.3

 

2

IRC § 6103(p)(4).

Disclosures exempted from record-keeping 

requirements include certain public disclosures, disclosures to the 

Department of the Treasury and Department of Justice for taxadministration or litigation purposes, disclosures to persons with a 

material interest (for example, partners and trustees), disclosure to third 

parties through taxpayer consent, and disclosures to determine the 

eligibility for and amount of benefits for certain government programs.

3

IRC § 6103(p)(3).

Safeguard 

Requirements 

Record-Keeping 

Requirements 
Appendix II: The Fair Information Practices

Page 29 GAO-12-231SP Taxpayer Privacy Guide

In response to growing concern about the harmful consequences that 

computerized data systems could have on the privacy of personal 

information, the Secretary of Health, Education & Welfare commissioned 

an advisory committee in 1972 to examine the extent to to which 

limitations should be placed on the application of computer technology to 

record keeping about people. The committee’s final report proposed a set 

of principles for protecting the privacy and security of personal 

information, known as the Fair Information Practices.1 These practices 

were intended to address what the committee termed a poor level of 

protection afforded to privacy under existing law, and they underlie the 

major provisions of the Privacy Act, which was enacted the following year. 

A revised version of the Fair Information Practices, developed by the 

Organisation for Economic Co-operation and Development (OECD) in 

1980, has been widely adopted and was endorsed by the U.S. 

Department of Commerce in 1981.2 This version of the principles was 

reaffirmed by OECD ministers in a 1998 declaration and further endorsed 

in a 2006 OECD report.3 The OECD version of the principles is shown in 

table 2 below.

 

1

Department of Health, Education & Welfare, Records, Computers, and the Rights of 

Citizens: Report of the Secretary’s Advisory Committee on Automated Personal Data 

Systems (Washington, D.C.: 1973). 

2

OECD, Guidelines on the Protection of Privacy and Transborder Flow of Personal Data 

(Sept. 23, 1980). The OECD plays a prominent role in fostering good governance in the 

public service and in corporate activity among its 34 member countries. It produces 

internationally agreed-upon instruments, decisions, and recommendations to promote 

rules in areas where multilateral agreement is necessary for individual countries to make 

progress in the global economy. 

3

OECD, Making Privacy Notices Simple: An OECD Report and Recommendations (July 

24, 2006). 

Appendix II: The Fair Information Practices
Appendix II: The Fair Information Practices

Page 30 GAO-12-231SP Taxpayer Privacy Guide

Table 2: The Fair Information Practices

Principle Description 

Collection limitation The collection of personal information should be 1. limited, 2. should be obtained by lawful and fair 

means, and, 3. where appropriate, with the knowledge or consent of the individual. 

Data quality Personal information should be 1. relevant to the purpose for which it is collected, and should be 2. 

accurate, 3. complete, and 4. current as needed for that purpose. 

Purpose specification The purposes for the collection of personal information should be 1. disclosed before collection and 

upon any change to that purpose, and 2. its use should be limited to those purposes and compatible 

purposes. 

Use limitation Personal information should not be disclosed or otherwise used for other than a specified purpose 

without consent of the individual or legal authority. 

Security safeguards Personal information should be protected with reasonable security safeguards against risks such as loss 

or unauthorized access, destruction, use, modification, or disclosure. 

Openness 1. The public should be informed about privacy policies and practices, and 2. individuals should have 

ready means of learning about the use of personal information. 

Individual participation Individuals should have the following rights: 1. to know about the collection of personal information, 2. to 

access that information, 3. to request correction, and 4. to challenge the denial of those rights. 

Accountability Individuals controlling the collection or use of personal information should be accountable for taking 

steps to ensure the implementation of these principles. 

Source: Organisation for Economic Co-operation and Development.
Appendix III: Compilation of Guide Questions

Page 31 GAO-12-231SP Taxpayer Privacy Guide

The following threshold and policy-factor questions and subquestions are 

in figure 2 and throughout the body of the guide.

THRESHOLD QUESTIONS FOR SCREENING ANY SECTION 6103 

EXCEPTION PROPOSAL

1. Does the proposal have a clear purpose and description of how the 

tax information will be used?

• What specific information will be disclosed?

• To whom will the information be disclosed?

• What category or categories of taxpayers will be affected?

• How will the information be used?

• What purpose will be achieved?

2. Does the proposal consider reasonable alternatives?

3. Is the tax information accurate, complete, and current enough for the 

stated purpose?

4. Is the tax information to be disclosed relevant and the minimum 

needed to achieve the stated purpose?

5. Does the proposal address any other statutory, regulatory, or 

logistical issues necessary for its implementation?

• Will the proposal require additional legislation besides modifying 

section 6103 to accomplish the desired result?

• Does the proposal conflict with existing regulations, rules, or 

statutes other than Section 6103?

• How will any logistical or practical barriers or hindrances to 

implementing the proposed disclosure and use of information for 

the stated purpose be resolved?

POLICY-FACTOR QUESTIONS FOR FURTHER CONSIDERATION OF 

SECTION 6103 PROPOSALS

Expected Benefits and Costs

1. What are the expected benefits of the proposal to disclose tax 

information?

• What are the estimated financial benefits, if any, to be achieved by 

using tax data?

• What are the nonfinancial benefits that are expected, if any?

Appendix III: Compilation of Guide 

Questions 
Appendix III: Compilation of Guide Questions

Page 32 GAO-12-231SP Taxpayer Privacy Guide

2. What are the expected costs of obtaining and using the tax 

information to be disclosed?

• What are the estimated costs for IRS to provide the tax data?

• What are the estimated costs to the entity receiving the 

information?

• What are the expected costs for others affected by the taxdisclosure proposal?

Privacy effect and safeguards

3. What is the potential effect on privacy?

• To what extent will the proposal adversely affect taxpayer privacy?

• Is the use of the information transparent and limited?

• Will sufficient notice and control be provided to individuals?

4. What risks of improper use or unauthorized disclosure does the 

proposal create and how well does the proposal address those risks?

• Does the proposal adequately take into account risks of 

unauthorized use or redisclosure associated with the disclosure?

• Does the proposal provide adequate safeguards to mitigate those 

risks? 

Effects on the tax system

5. What is the potential effect on voluntary taxpayer compliance?

• What is the potential effect on voluntary compliance by taxpayers 

whose tax information will be disclosed?

• What is the potential effect on general voluntary compliance for 

other taxpayers?

6. What is the potential effect on tax administration?

• How much will implementing the proposal affect current IRS 

activities or performance?

• How much will any related safeguard responsibilities add to IRS’s 

current responsibilities?
Appendix IV: GAO Contact and Staff 

Acknowledgments

Page 33 GAO-12-231SP Taxpayer Privacy Guide

Michael Brostek, (202) 512-9110, brostekm@gao.gov

In addition to the contact named above, David Lewis, Assistant Director; 

MaryLynn Sergent, Assistant Director; John de Ferrari, Assistant Director; 

Marisol Cruz; Ronald Fecso, Chief Statistician; Bertha Dong; Ronald W. 

Jones; Shirley Jones, Assistant General Counsel; Veronica Mayhand; 

Donna Miller; Ellen Rominger; Cynthia Saunders; Sabrina Streagle; and 

Gregory Wilshusen, Director; made key contributions to this guide.

Appendix IV: GAO Contact and Staff 

Acknowledgments 

GAO Contact

Staff 

Acknowledgments 
Glossary

Page 34 GAO-12-231SP Taxpayer Privacy Guide

Preserving authorized restrictions on information access and disclosure, 

including means for protecting personally identifiable information.

Making a return or return information known to any person in any manner.

A set of internationally recognized practices for addressing the privacy of 

information about individuals, which are the underlying policy for many 

national laws on privacy and data protection including the U.S. Privacy 

Act of 1974.

Any payment that should not have been made or was made in an 

incorrect amount under statutory, contractual, administrative, or other 

legally applicable requirements.

The 1974 act that regulates the collection, use, dissemination, and 

maintenance of personal information by federal agencies. The act applies 

only to records about individuals that are maintained in a “system of 

records.” 

Under the Privacy Act, any item or collection of information about an 

individual that an agency maintains and that contains that individual’s 

name, identifying number, symbol, or other identifying particular, such as 

a fingerprint, voice print, or photograph.

A tax or information return, declaration of estimated tax, or claim for 

refunds under the Internal Revenue Code, which is filed with the IRS by 

or on behalf of a person. Returns also include any amendments or 

supplements to a filed return.

Return information is broadly defined in the Internal Revenue Code to 

include

• a taxpayer’s identity, the nature, source, or amount of income, 

payments, receipts, deductions, exemptions, credits, assets, liabilities, 

net worth, lax liability, tax withheld, deficiencies, overassessments, or 

tax payments;

Glossary

Confidentiality

Disclosure

Fair Information Practices

Improper payments

Privacy Act 

Record

Return 

Return information
Glossary

Page 35 GAO-12-231SP Taxpayer Privacy Guide

• whether the taxpayer’s return was, is being, or will be examined or 

subject to other investigation or processing;

• any other data, received by, recorded by, prepared by, furnished to, or 

collected by the IRS 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 for any tax, penalty, interest, fine, 

forfeiture, or other imposition or offense;

• any part of any written determination or any background file document 

relating to such written determination ... that is not open to inspection 

under section 6110 for public inspection of written determinations;

• any advance pricing agreement between the taxpayer and IRS on the 

taxpayer’s international transactions, and related background 

information, entered into by a taxpayer; and

• any agreement between the taxpayer and IRS related to the 

taxpayer’s tax liability that conclusively closes the case, and any 

similar agreement along with any related background information.

Under the Privacy Act, a group of records under the control of an agency 

from which information is retrieved by an individual’s name or some other 

identifier assigned to that individual. The Privacy Act only applies to 

records about individuals maintained in a system of records.

Protective procedures required, as a condition for receiving tax 

information, for keeping the information confidential, including 

establishing and maintaining a permanent standardized system of 

records; storing the information in a secure area; restricting access to the 

information; returning or disposing of the information after usage is 

completed; providing other procedures IRS determines necessary or 

appropriate; and providing a report describing the established safeguard 

procedures to IRS upon request.

Under Section 6103, disclosure of returns and return information to any 

person or persons designated by the taxpayer, subject to requirements 

and conditions of Department of the Treasury regulations.

A system that relies in part on taxpayers reporting and paying their taxes 

as required with no direct enforcement and minimal interaction with the 

government. 

System of records

Safeguards

Taxpayer consent

Voluntary compliance
Bibliography

Page 36 GAO-12-231SP Taxpayer Privacy Guide

This bibliography contains selected items on Internal Revenue Code 

Section 6103 and tax-information confidentiality.

Department of the Treasury. National Taxpayer Advocate: 2003 Annual 

Report to Congress. Washington, D.C.: December 2003.

Department of the Treasury. Report to The Congress on Scope and Use 

of Taxpayer Confidentiality and Disclosure Provisions, vol. I, “Study of 

General Provisions.” Washington, D.C.: October 2, 2000.

Internal Revenue Service. Tax Information Security Guidelines For 

Federal, State and Local Agencies, Publication 1075. Washington, D.C.: 

August 2010.

Internal Revenue Service. Disclosure and Privacy Law Reference Guide, 

Publication 4639. Washington, D.C.: September 2011. 

Joint Committee on Taxation. Study of Present-Law Taxpayer 

Confidentiality and Disclosure Provisions as Required by Section 3802 of 

the Internal Revenue Service Restructuring and Reform Act of 1998, vol. 

1, “Study of General Disclosure Provisions,” JCS-1-00. Washington, D.C.: 

January 28, 2000.

Bibliography

(450875)
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