CONFIDENTIALITY OF THE TAXPAYER IDENTIFICATION NUMBER UNDER THE INTERNAL REVENUE CODE

CRS Report for Congress
Confidentiality of the Taxpayer Identification
Number under the Internal Revenue Code
September 28, 1999
Marie B. Morris
Legislative Attorney
American Law Division

Congressional Research Service ˜ The Library of Congress

ABSTRACT
Section 6109 of the Internal Revenue Code makes an individual’s Social Security number the
individual’s taxpayer identification number [TIN]. The same section requires taxpayers to
furnish their TINs to the Internal Revenue Service and to other persons whenever the Internal
Revenue Service determines that securing the proper identification of the person is necessary.
This report illustrates the wide variety of situations in which individuals are required by the
Internal Revenue Code to furnish their taxpayer identification numbers, either to the IRS or
to third parties. There are no current plans to update the report.

Confidentiality of the Taxpayer Identification Number under
the Internal Revenue Code
Summary
Section 6109 of the Internal Revenue Code makes an individual’s Social Security
number the individual’s taxpayer identification number [TIN]. The same section
requires taxpayers to furnish their TINS to the Internal Revenue Service and to other
persons whenever the Internal Revenue Service determines that securing the proper
identification of the person is necessary. Many Code sections require taxpayers to
collect and furnish the TINS of third-parties with whom they have dealings in order
to claim a benefit or a deduction. The first part of this report compiles instances in
which individuals must furnish their TINS or the TINS of another person in order to
file their tax return. The second and third parts examine the times when a taxpayer
must furnish a TIN to a third party and the times when the Code permits disclosure
of tax return information (which usually contains the TIN) to other parties. The last
part discusses penalties for improper disclosure of tax return information and penalties
for failing to disclose a TIN when required to furnish it.

Contents
Background ................................................ 1
TINS on Taxpayer’s Return....................................1
TINs to Third Parties.........................................2
Permissible Disclosures.......................................6
Penalties for Disclosure.......................................7
Penalties for Failing to Disclose.................................8
List of Tables
Table 1. Requirements to Furnish TINs on Taxpayer’s Return.............1
Table 2. Requirement to Furnish Taxpayer’s TIN to Another Party..........3
Table 3. Examples of Persons to Whom IRS Can
Disclose Taxpayer Return Information............................6

Confidentiality of the Taxpayer Identification
Number under the Internal Revenue Code
Background
In October 1961, Congress authorized the Internal Revenue Service to require
identifying numbers on tax returns. Fifteen years later, the Tax Reform Act of¹

1976 codified IRS practice that the Social Security number was to be used as the²

identifying number for individuals. Since that time Congress has adopted many
provisions which require individuals to furnish their TINs or the TINs of other
persons with whom they have dealings in order to claim a tax benefit or to enable the
IRS to match returns with information reports in order to verify claims on returns.
This report is intended to illustrate the wide variety of situations in which individuals
are required by the Internal Revenue Code to furnish their taxpayer identification
numbers, either to the IRS or to third parties.
TINS on Taxpayer’s Return
The table below lists Code sections which require taxpayers to furnish either
their TIN or another person’s TIN on their individual tax returns.
Table 1. Requirements to Furnish TINs on Taxpayer’s Return
Whose TINWhy Required
Taxpayer’sIRC § 6109; 26 CFR §301.6109-1
Identify taxpayer’s return
Taxpayer’s spouse’sIRC § 6012; 26 CFR §301.6109-1
Joint return requirements
IRC § 151 Personal exemption
Taxpayer’s dependents’IRC § 23 Adoption tax credit
IRC § 24 Child tax credit
IRC § 25A Hope Scholarship and Lifetime learning credits
IRC § 32 Earned income credit
IRC § 151 Dependency exemption

P.L. 87-397, §1, enacted a new IRC § 6109.¹
P.L. 94-455, §1211; IRC § 6109(d).²

Whose TINWhy Required
Child care provider’sIRC § 21 Child care tax credit
IRC § 129 Dependent care assistance program income
exclusion
Tax preparer’sIRC § 6109(a)(4)³
Parent’s (if taxpayer isIRC § 1(g) Minor child with unearned income is taxed at
child under age 14)rates determined by parents’ income
Former spouse’sIRC § 215(c) Alimony deduction
TINs to Third Parties
In a wide variety of situations, the Internal Revenue Code requires taxpayers to
give their TINs to third parties. Often the requirement is deemed necessary in order
to permit the IRS to match the income and deduction side of the same transaction or
to verify that the proper tax rates were used or the proper amount of tax was withheld
or reported. The more persons with whom a taxpayer may be doing business or from
whom a taxpayer may be receiving income the more persons there will be who are
entitled to know a taxpayer’s TIN.
Recently, there has been recognition that in some instances having to provide
a TIN may make one vulnerable to identity theft. Beginning with returns prepared⁴
after 1999, individual tax return preparers are permitted to request an alternative
“Preparer Tax Identification Number” for use when preparing tax returns. Although
there is no pending legislation to extend this idea to other taxpayers, this does provide
a precedent for individuals having a public and a private TIN.
Table 2 below emphasizes the number of taxpayers who are required to furnish
their TIN to third parties for a variety of purposes.

Beginning in November 1999, tax return preparers can obtain a “preparer tax³
identification number” [PTIN] to use on returns which they are paid to prepare. This number
is to protect the privacy of the preparer’s TIN. The use of an alternative number was
authorized by the IRS Restructuring and Reform Act of 1998, P.L. 105-206, § 3710.
IR-1999-72 states that the IRS Restructuring and Reform Act of 1998 authorized the⁴
use of PTINs to respond to “concerns that a preparer’s SSN could be used inappropriately
by clientele and others having access to a prepared return.”

Table 2. Requirement to Furnish Taxpayer’s TIN to Another Party
Who To WhomWhen Why Required
Provides
ParentChild underIf child’sIRC § 1(g) Minor child with unearned
age 14 withincome notincome is taxed at rates determined by
unearnedreported onparents’ income
incomeparent’s return,
in time to file
return
AlimonyFormerIn time forIRC § 215(g) To verify alimony income
recipientspousetaxpayer to filecompared to alimony deduction
return
Child careCustomers ofIn time forIRC § 21 Child care tax credit
providerschild carecustomers toIRC § 129 Child care assistance program
providersfile returnprovider
Medical Trustee ofWhen accountIRC § 220(j)(4) Reporting by MSA
Savings medical opened trustees
Account savings
holderaccount
Seller of realBuyer of realAt time of saleIRC § 1445(b) If seller’s TIN not
propertypropertyof residencefurnished, buyer must withhold 10% of
worth moreamount realized
than $300,000
or sale of
nonresidential
property
Seller of realBuyer of realBuyerIRC § 6109(h) Requires taxpayers
propertyproperty ifdeductingclaiming a deduction under IRC § 163 for
sellerinterestqualified residence interest where seller
providesincludesprovided financing to include seller’s TIN
financingseller’s TIN onon return
return
EmployeeEmployerOn employmentIRC § 6109; IRC §§ 3101, 3102, 3111
To withhold Social Security taxes;
IRC § 3402 Income taxes;
IRC § 3301 Unemployment taxes; IRC §
6051 Statements of withholding to
employees;
IRC § 6039D Participants in fringe
benefit plans;
IRC § 6057 Participants in ERISA plans;
IRC § 6053 To report tips;
IRC § 6060 Where employee is income
tax return preparer

Who To WhomWhen Why Required
Provides
Recipients ofPayersAt time ofIRC § 3401(o) Recipients of sick pay,
certain wagerequest forcertain annuities, or supplemental
equivalentswithholding ofunemployment compensation can request
income taxeswithholding from third-party payer of
benefit
GamblersPayers ofOn winningIRC § 3402(q) Payers of certain
winningsgambling winnings are required to deduct
and withhold
PensionPayersBefore paymentIRC § 3405 Requires withholding unless
recipientsrecipient elects out; no election out
permitted unless recipient furnishes payer
with TIN
InterestPayers, e.g.On openingIRC § 3406 Back-up withholding
recipientsbanksaccountrequired if TIN not furnished; IRC §
6049
DividendPayers ofOn openingIRC § 3406 Back-up withholding if TIN
recipientsdividendsaccount, stocknot furnished; IRC § 6042(a), 6044
purchase
OtherPayers ofVariousIRC § 3406 Back-up withholding if TIN
incomeincomenot furnished:
recipientsIRC § 6041 Payments of $600 or more
made by a trade or business;
IRC § 6041A Payments of $600 or more
made by a trade or business for services
rendered to the business;
IRC § 6041A Transfers of goods worth
$5,000 or more to direct sellers;
IRC § 6045 Returns of brokers,
middlemen, real estate persons;
IRC § 6050A Fishing boat operators
must report shares of the catch;
IRC § 6050N Payers of royalties;
IRC § 6050Q Payers of long-term health
care benefits must report TIN of insured
and TIN of individual recipient
ApplicantsIRSApplicationIRC § 6039E
for U.S.
passport
ApplicantsIRSApplicationIRC § 6039E
for
permanent
resident
status

Who To WhomWhen Why Required
Provides
PersonsIRSTime ofIRC § 6039G
abandoning renunciation
U.S.
citizenship
PurchasersRecipients ofAt time ofIRC § 6050I Requires reporting receipt of
using cashmore thanpaymentpayments aggregating more than $10,000
payments$10,000 in cash to IRS
greater thanin cash,
$10,000 including
from persons
posting bail
Donors ofDoneePrior to sale ofIRC § 6050L requires donees who sell
more thanproperty bydonations within two years of receipt to
$5000 ofdoneereport donor’s TIN to IRS
property
ContractorsHead ofEntry intoIRC § 6050M requires reporting of TIN
with federalfederalcontractof every person with whom the agency
governmentexecutive enters a contract during the year
agency
MortgagorsMortgageEntry intoIRC § 6050H requires mortgagees
holdercontractreceiving $600 or more of interest to file
annual return with IRS and mortgagor
DebtorsFinancialWhen debt ofIRC § 6050P requires reporting
entities and$600 or more iscancellation of indebtedness of more than
government canceled $600
agencies
Students andEducationalOn enrollmentIRC § 6050S requires reporting of higher
parentsinstitution,education tuition and related expenses
student loan
providers,
tuition plans
TaxpayerTax return In order toIRC § 6107 requires return preparers to
who payspreparerprepare returnkeep a list of name and TIN of taxpayers
returnwhose returns they prepare
preparer
Tax returnTaxpayerOn returnIRC § 6107, 6109(a)(4)⁵
preparer
PartnerPartnersFor returnsIRC §§ 6229(e); 6230(e)

See fn. 3 above.⁵

Permissible Disclosures
The Internal Revenue Code contains stringent penalties for disclosing taxpayers’
returns and taxpayer return information. Consequently, the law is fairly explicit about
when taxpayer return information may be disclosed and to whom. Most of the
disclosure authority is contained in IRC § 6103. The following chart contains
examples of instances in which taxpayers’ returns, and thus their TINs, might be
disclosed to other entities by the IRS. In many of these instances, however, the
recipient of the return information may already have the taxpayer’s identification
number. In fact, the recipient may be required to identify the taxpayer by number in
order to receive the requested return. The chart does not list the many entities that
are entitled to statistical information which can only be produced in an anonymous
form which does not identify a particular taxpayer directly or indirectly.
Table 3. Examples of Persons to Whom IRS Can Disclose Taxpayer
Return Information
To WhomReasonAuthority
Designee of taxpayerTaxpayer requestIRC § 6103(c)
State tax officials and lawAdministration of state tax laws, taxIRC § 6103(d)
enforcement agencies,refunds, auditing state revenues,
state audit agenciesdetermining reward for assisting in
recovery of federal taxes
Taxpayer, taxpayer’sDisclosure to persons with materialIRC § 6103(e)
spouse or child, partners,interest, who filed joint return, who need
certain shareholders orinformation to perform fiduciary duties
officers, guardian of
incompetent, administrator
of estate, bankruptcy
trustee
Tax Committees ofOn request, but only when sitting inIRC §
Congressclosed executive session6103(f)(1)
Other CommitteesBy House or Senate Resolution, but onlyIRC §
when sitting in closed executive session6103(f)(3)
FBI, Executive Office ofWhere individual is under considerationIRC § 6103(g)
the President, agency headfor executive or judicial appointment
Treasury employeesWhere official duties require disclosureIRC §
for tax administration purposes6103(h)(1)
Justice employeesGrand jury proceedings, where taxpayerIRC §
is a party to the proceedings6103(h)(2)
Federal criminalReasonable cause to believe a criminalIRC § 6103(i)
investigators with courtact has been committed and tax return
order may be relevant; to locate fugitives from
justice

To WhomReasonAuthority
Federal agency headEvidence of a violation of a federal non-IRC § 6103(i)(3)
tax criminal law
Comptroller General,Auditing IRSIRC § 6103(i)(7)
GAO employees
General publicInspection of accepted offers-in-IRC §
compromise; unclaimed tax refunds6103(k)(1), (m)
Potential lien-holdersDisclosure of amount of outstandingIRC §
obligation secured by liens6103(k)(2)
Foreign governmentExchange of information under taxIRC §
“competent authority”treaties6103(k)(4)
Financial ManagementTo levy on government paymentsIRC §
Service 6103(k)(8)
Credit card companiesTo accept payments to IRS by creditIRC §
card6103(k)(9)
Various governmentTo carry out acts relating to SocialIRC § 6103(l)
agenciesSecurity, food stamps, housing
assistance, student loans, FERS, HCFA,
Medicare, DC Retirement Protection
Act, blood donor locators
National ArchivesTo evaluate records for destruction orIRC §
retention 6103( l)(17)
Penalties for Disclosure
The Internal Revenue Code contains two main penalties for disclosure of tax
returns and tax return information. Section 7213 makes willful disclosure which is not
authorized by the Internal Revenue Code a felony punishable by a fine up to $5,000
or imprisonment of not more than 5 years, or both, plus the costs of prosecution. In
addition to any other punishment imposed by law, federal employees must be
discharged from employment upon conviction. Different paragraphs of the section
apply to federal employees and contractors and to state and local employees. In
addition recipients of information which was not authorized to be disclosed by the
Internal Revenue Code can be subject to the same punishment for printing or
publishing a return or return information in a manner not provided for by law. It is
also a felony to offer to exchange any item of material value in exchange for a return
or return information, and to receive in exchange for such solicitation any return or
return information. The same $5,000/5-year potential penalties apply.
The second major penalty, contained in IRC § 7216, applies to tax return
preparers. If any person who prepares a return for compensation knowingly or
recklessly discloses any information furnished to him in connection with the

preparation of a return, or knowingly or recklessly uses any such information for any
purpose other than to prepare a return, then that person is guilty of a misdemeanor
and can be fined up to $1,000 or imprisoned up to one year, or both, plus the costs
of prosecution. There are exceptions for disclosures permitted under the Internal
Revenue Code, ordered by a court, or made in order to prepare the person’s state or
local tax returns.
Penalties for Failing to Disclose
The principal penalty for failing to disclose one’s TIN when requested is
contained in IRC § 6723, which provides for a $50 penalty for each failure to comply
with a “specified information reporting requirement.” The maximum annual penalty
is $100,000. There are also “penalties” in the sense that certain deductions cannot be
taken unless a TIN is furnished or that additional withholding on certain distributions
will be required. For example, IRC § 151(e) provides that no exemption shall be
allowed unless the TIN of such individual is included on the return claiming the
exemption. The loss of the exemption amount may exceed the $50 penalty amount.
Under IRC §§ 3405 and 3406, backup withholding is required unless the taxpayer
furnishes the proper TIN to the payer of income.