Hamill: Tax privacy matters, whether at home or in the halls of power

I do tax returns for family members. Family sometimes trusts you less, but the price (free) is right.

Tax preparers have a special obligation to respect privacy. Perhaps you never thought about how much information can be gleaned from an income tax return.

I once headed the estate planning practice of the Phoenix office of an international certified public accounting firm.

I asked managers and partners to make notes for me during tax season. The annual tax return for an individual client was the best way to identify potential estate tax issues.

Back to the family. Sometimes, I have been asked about the financial situation of a family member.

Is their pension big enough to support them? How much did he make with that part-time gig?

Does he have any savings? How big is his mortgage? What interest rate does he have?

These questions are often meant well. The goal is to assess if the family member is doing OK financially.

I know the answers to all of these questions and more. Have a mortgage? The 1098 form tells how much you owe and the interest rate and payments.

Have investments? The 1099 forms tell how much interest, dividends and capital gains you have.

I know how much you gave to charity last year. Self-employed? I know your income and expenses.

I can even learn about medical conditions that you suffer from. Your medical expenses may even identify a battle with cancer.

The respect that your tax preparer gives to your right to privacy is important. I never answer family-related questions about tax return information.

Section 6103 of the tax law requires that tax returns and return information be kept private.

Return information covered by Section 6103 includes basic information such as your address. It also includes whether your return is being audited.

Section 7431 of the tax law allows a taxpayer to bring a civil action against a government employee who violates Section 6103.

There are also potential criminal penalties for inappropriate disclosure. A government contractor was sentenced to prison for disclosing President Donald Trump’s returns.

All of this is why there has been so much pushback against the Department of Government Efficiency’s efforts to access tax return information.

DOGE is really not a government agency. But giving these efforts the benefit of the doubt, let’s say the request is to share tax return information with another agency.

To some, that may seem like a small request. But, again, think about how much personal data — financial, health and generosity — that is in those returns.

Joseph Thorndike wrote a recent item in the publication Tax Notes explaining the history of Section 6103 privacy rules.

Thorndike explains that the rule followed U.S. Department of Agriculture efforts to gather more data about farms.

This included livestock numbers by species and class, acreage yield for farming operations, prices paid and received for crops, and wage data for farm workers.

There was no other source of data that could be broken down enough to allow Agriculture Department statisticians to accurately assess farm operations.

President Richard Nixon signed an executive order in 1973 granting the Agriculture Department access to post-1966 income tax returns.

The request seemed reasonable. Thorndike wrote, “The political blowback was immediate, powerful and predictable.”

Section 6103 followed. Current efforts to use private tax return data for immigration enforcement should not be viewed as better than farm data analysis.

Trump is also fighting with Harvard University. A Truth Social post from Trump suggested the university’s tax-exempt status should be investigated.

Section 7217 specifically mentions the president as not being able to request a taxpayer audit. This is a Nixonian enemies list provision.

A White House spokesman said that Harvard’s exempt status was under review before the president’s post.

Stephen Olsen wrote a recent item in Tax Notes assessing the legality of the audit revelation under Section 6103.

Olsen noted that CNN reported the audit activity before the spokesperson’s comment. Perhaps that made the information in the public realm.

It is not clear if public revelation by a news organization protects a government official from disclosing the existence of an audit.

Olsen is an expert on tax administration, and he ended his article by noting that he could not opine on the legality of the Harvard audit revelations.

But understand that these are serious issues and that each of us should be concerned about the privacy of our tax return data.

We should not say, ‘Well, if you’ve done nothing wrong, why are you worried about the information being shared within the government?’