New IRS Tax Trap Alert from Lee Bellinger

TAX TRAP ALERT!

By Lee Bellinger

I want to take a moment to show you how to even the score if you or someone you know is ever targeted by the IRS.
Look, if you are a productive person, the chances of an intrusive IRS audit of your total financial picture is much higher than ever before. Worse, the IRS is armed with far more resources and high-level political support to put the screws on small businesses than at any time in history.

You May Soon Need to Know What the IRS Knows About You

I want to show you how to find out exactly what the IRS knows about you.
Let me explain more about why that has become so important. It’s no secret that the IRS is by nature a secretive agency and would generally like taxpayers to be as ignorant as possible as to how it functions. To the IRS, it’s an “us against them” battle, and they believe they have to guard their secrets zealously.
One of the IRS’s best kept secrets is the Individual Master File (IMF) it keeps on each individual taxpayer. The IRS Handbook for Special Agents describes the Individual Master File as “a magnetic tape record of all individual income tax filers, in Social Security sequence, and… all tax data and related information pertaining to individual income taxpayers are posted to the IMF so that the file reflects a continuously updated and current record of each taxpayer’s account.”
Your IMF reveals:
  • basic identifying information (Social Security number, name, address, etc.);
  • your spouse’s name and Social Security number;
  • what types of forms you have filed with the IRS;
  • if IRS has identified you as a non-filer (and whether you are classified as a “tax protestor” or whether the Service assumes that you aren’t required to file);
  • your recorded “income” (wages, dividends, etc.);
  • any penalties you have been hit with;
  • any liens, levies, or criminal charges filed (or perhaps pending).
An even bigger secret of which few taxpayers are aware is their right to obtain a copy of their IMF and demand that any errors it contains be corrected.

Armed with this information, you may be able to:

  • protect yourself against bogus determinations, assessments, penalties, and enforcement actions that an IRS agent may threaten;
  • find out if the IRS has given up trying to collect on an old tax liability;
  • find out if the IRS owes you money;
  • determine whether the IRS is planning to audit you;
  • determine whether the IRS is planning to bring criminal charges against you;
  • identify other problems that you could run into in the future.
The IRS stores IMFs and BMFs (Business Master Files) in a database known as the Integrated Data Retrieval System. An IRS employee at any local IRS office around the country can access the Integrated Data Retrieval System (and can quickly call up your file).

How to Demand a Copy of Your IRS File

The IRS has no form for requesting your Individual Master File, because it doesn’t want you to have it. However, there is a law called the Freedom of Information Act (FOIA) which you can use to force the IRS to send you the file it keeps on you.
Enacted in 1966, the Freedom of Information Act established a legal right of access to government information. To make a FOIA request, you need simply to write a letter explicitly asserting your rights under the Act. Your FOIA request must be signed with proof of your identity. The U.S. Department of the Treasury advises citizens who initiate FOIA requests as follows:
To protect the confidentiality of information and to prevent an unwarranted invasion of personal privacy, you must:

  • sign your request; and,
  • establish your right to receive the requested documents by providing a photocopy of an identifying document bearing your signature (such as a driver’s license, identification badge, or passport), or a notarized statement swearing to or affirming your identity.
Send your letter and any enclosures via certified mail. You can contact the IRS FOIA headquarters office directly by phone (770-234-4374) with any questions or to verify that their FOIA policies haven’t changed since the time of this writing.

The IRS’s Response

Government agencies are required to fill your request, or explain why they cannot, within ten days. However, if the IRS claims an “unusual circumstances” extension, it could delay your request for weeks or months.
In general, you’re more likely to get a prompt and thorough response if you make your request after the month of April. From January through April, the IRS tends to be swamped with letters, calls, and paperwork from tax filers. Don’t be surprised if IRS tries to give you the run-around. The IRS has a poor track record for responding to FOIA requests. Part of the reason may be that some taxpayers who are in trouble with the IRS barrage the agency with FOIA requests in an effort to distract, slow down, and frustrate agents.
If the IRS stonewalls or denies your legitimate request for your Individual Master File, you can make an administrative appeal to someone higher up in the IRS hierarchy. If that fails, then the Freedom of Information Act provides you with the right to bring a civil lawsuit against the agency in an appropriate Federal district court (either in Washington, D.C. or where the requester resides).

Direct your appeal to:

IRS Appeals Attn: FOIA Appeals
5045 E. Butler Ave.
M/Stop 55201
Fresno, California 93727-5136
Important: FOIA regulations require that your appeal be postmarked within 35 days of a letter denying FOIA access.

Decoding the Hidden Information
Contained in Your File

If you have succeeded in obtaining your Master File, congratulations! Unfortunately, you still have some work left to do.
Your IMF is not a plain-English document. It contains secret codes that are meant to be read by IRS computers or by those who have been trained to decipher the codes. The IRS does not attempt to make the IMF decipherable to the ordinary taxpayer. Instead, the copy of the IMF it sends out consists of numbers and letters that are meaningless to the untrained eye.
To decode your IMF, you need IRS 6209 Manual. The IRS updates this publication annually, and you can find the latest version on the IRS website at this link. You have the right under the Freedom of Information Act to view the most recent edition of 6209. You can either arrange to pay a visit to an IRS office to read the Manual, view it online, or request that the IRS send you a copy. It’s a thick publication and will cost around $50.