An employer can compel the disclosure of third-party taxpayer information to absolve itself of withholding tax liabilities, the Tax Court held April 5 in a reviewed opinion. In Mescalero Apache Tribe v. Commissioner, 148 T.C. No. 11 (2017), the court found that disclosing that information wasn’t prohibited by section 6103.
“The Court’s decision reflects the practical and realistic application of section 6103 and the exception under [6103(h)] in these circumstances,” Mark D. Allison of Caplin & Drysdale, Chtd. told Tax Analysts. “The IRS should not be able to use section 6103 in a sword-and-shield fashion to attack the taxpayer’s classification of its employees and at the same time preclude it from obtaining the information it needs to support its position.”
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Allison also noted that “only the information necessary to resolve the classification issue should be made available to the taxpayer, as section 6103 should be applied as narrowly as possible to address the issue before the court.”
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Excerpt taken from the article “Court Takes Practical Approach to Return Information Disclosure” by Stephanie Cumings for Tax Notes.