Don't Mess With Taxes

Michael Cohen makes his opening statement before the House Oversight Committee on Feb. 27, 2019. (C-SPAN video screenshot)

We have a complicated relationship with money, particularly when it comes to divulging details about it in our personal lives.

Few of us (outside of personal finance bloggers) want to say how much we make. We tend to be vague, saying we're doing fine or perhaps going as far as to say things like "in the high five figures."

We're a little more forthcoming when it comes to taxes, especially when we get tax refunds or don't, as recent social media complaints about the effects of the Tax Cuts and Jobs Act on those amounts indicate.

We're even more willing to get specific when it comes to how much we paid in taxes. Unless, of course, you're Donald J. Trump.

Trump tax privacy debate: That, of course, is his prerogative. Every taxpayer is guaranteed privacy when it comes to their legal dealings with the Internal Revenue Service. That's ensconced (#7) in the IRS' Taxpayer Bill of Rights.

Still, most recent politicians seeking the White House have shared at least some of their tax data with the voters. Trump defied this 40-year tradition in 2016 when he refused to make any of taxes public.

With Democrats back in charge of the House of Representatives, it looks like at least some members of Congress could get look at Trump's tax returns.

Tax hints from former attorney: Amid that tax and political debate, comes a criminal charge against an Internal Revenue Service employee accused of leaking information regarding one of Trump's most (in)famous friend-turned-foe, Michael Cohen.

Cohen, you might recall — and if you don't, I'll give a few minutes to turn on cable news, where his House Oversight Committee testimony is still being rehashed — spent a decade as a trusted aide and personal attorney to Trump before the real estate developer went into politics.

Now Trump's former self-proclaimed fixer is spilling his guts about what he saw during those years in New York City.

Among Cohen's recommendations to Congress is that lawmakers take a closer look at Trump's taxes and other financial filings for what they can reveal about his earnings and business practices.

However, it looks like some of Cohen's private financial data made its way into the public sphere before any of Trump's information.

Even more disturbing, that material allegedly was leaked by an IRS employee.

IRS agent charged with privacy breach: Federal prosecutors in San Francisco on Feb. 4 filed a criminal complaint against IRS employee John C. Fry, charging him with illegally leaking banking records connected to Cohen.

The complaint, which originally was sealed, was made public by the U.S. Attorney's Office for the Northern District of California on Feb. 21.

Prosecutors allege that Fry, who joined the IRS in 2008, had access in his role as an analyst with the tax agency's Criminal Investigation unit "to various law enforcement databases" and used them to conduct multiple searches for records related to Cohen.

The criminal complaint alleges Fry then gave the information to a Newport Beach, California attorney, who is not charged in the matter.

That lawyer is not named, but based on actions subsequent to the leak, it is believed he is Michael Avenatti. In case you've forgotten about this part of the Trump saga, Avenatti is the lawyer representing adult film actress Stephanie Clifford, also known as Stormy Daniels, in her legal proceedings against Trump, with whom she claims to have had an affair.

The lawyer who received Cohen's material, notes the complaint, posted on Twitter about getting the "confidential banking information related to the taxpayer and the taxpayer's company."

In addition, prosecutors say after downloading material relevant to Cohen, Fry made several phone calls to a number associated with Avenatti's office.

And there's one more thing in the complaint. Prosecutors also cite leaked Cohen bank information showing $500,000 from a company connected to a Russian oligarch who donated money to Trump's inauguration fund.

Senate tax writer wants answers: Now Congress is getting involved (again), or at least one member, in connection with the taxpayer privacy breach.

Sen. Chuck Grassley (R-Iowa), the head of the tax-writing Senate Finance Committee, is demanding answers from the U.S. Treasury and IRS about the privacy breach.

Grassley wants the Treasury Department to explain why it omitted bank records sought in a Congressional inquiry into Russian influence that were later leaked to the news media.

Grassley also wants to know what steps the IRS is taking to hold accountable the employee who leaked sensitive banking information related to Cohen.

"Sensitive banking information should be kept under lock and key to protect Americans' personal privacy, and access should be limited to official investigative matters," said Grassley in a statement about his concerns. "The reckless treatment of this information and investigative inquiries jeopardizes that privacy and risks undermining ongoing investigations."

Russian specifics sought: In a Feb. 27 letter to Treasury Secretary Steve Mnuchin, Grassley cites a BuzzFeed article published earlier that month regarding reported payments to a Russian lobbyist who attended the Trump Tower meeting that initiated investigations into potential foreign meddling in the United States' 2016 presidential election.

Grassley wants Treasury to provide by March 13 "all documents referenced in the BuzzFeed article and provide a detailed explanation as to why Treasury withheld documents from Congress during the course of a congressional investigation."

The SFC chair also wants by that date "all documents responsive to" Grassley's request back in September 2017 for all of the Treasury Department's Financial Crimes Enforcement Network (FinCEN) suspicious activity reports (SARs) related to a Senate Judiciary Committee investigation into Russian influence in the 2016 election.

IRS action questioned: As for the IRS' privacy problems, Grassley sent a separate letter on Feb. 26 to IRS Commissioner Charles Rettig seeking specifics by March 8 on how the tax agency "is holding accountable an employee who admitted to leaking sensitive SARs related to attorney Michael Cohen, which were later made public."

In both data breach instances, says Grassley, "Those entrusted with managing this information need to do a better job of protecting privacy, guarding against damaging leaks and complying with congressional investigations."

Senate request, complaint hearing timing: Fry was released on $50,000 bond. He faces a maximum sentence of five years and a $250,000 fine.

And in an interesting timing convergence, Fry's next scheduled court appearance will be before a U.S. Magistrate Judge for preliminary hearing or arraignment on indictment.

That's set for March 13, which is day that Grassley wants the information from the Treasury Department.

Coincidence, Sen. Grassley? Or just karmic tax privacy timing?

You also might find these items of interest:

• Securing taxpayer data is the IRS' biggest challenge
• Would the Taxpayer Bill of Rights prevented the IRS Tea Party scandal?
• Report of IRS plan to access taxpayer email without warrants raises privacy concerns

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