For a while now, the IRS has been getting a good rap -- it's kinder, gentler, someone answers the phone when you call, virtually no one's gotten audited in the last few years...you get the picture.
But in what cynics could easily call a clear abuse of power, the agency released the names last week of clients who took KPMG’s tax shelter advice. The list of names included Republican candidate for governor of California Bill Simon and late NASCAR legend Dale Earnhardt.
This kind of swaggering disregard for privacy is shocking. First of all, none of the tax shelters have yet (nor may they ever be) declared illegal. And none of the people named have been accused of any crime.
Given that the government earlier this month sued both KPMG and BDO Seidman for failing to disclose information about these same tax shelters, the release of the names could be viewed as an unfair pressure tactic on the firms and their clients.
The IRS and the Justice Department have been waging a years-long war against large accounting firms and the tax shelters they sell to clients, claiming that many of the products are frauds designed to evade taxes rightfully owed to the government.
BDO and KPMG have turned over reams of documents already, but have withheld certain items that they claim they shouldn’t be forced to reveal, citing accountant-client privilege.
All of these issues are for the courts to decide – and accounting firms, which are already smarting from the pain of accounting failures at Enron, WorldCom and others, shouldn’t be made to suffer any more front-page humiliation – without due cause.
To be fair to the agency, Treasury Department General Counsel David D. Aufhauser wrote a letter this week to the Wall Street Journal agreeing that the taxpayers named in the court documents should not have been "gratuitously humiliated" and promising that taxpayer identities would be protected in the future.
Nice sentiment, but it’s too little too late, and the damage has already been done.
