Taxpayer confidentiality isn’t just a legal technicality—it’s a fundamental pillar of trust in the U.S. tax system. Federal law is designed to ensure that individuals and businesses can comply with tax obligations without fear that their sensitive financial information will be mishandled or exposed. Yet, recent legal battles highlight a growing concern: What happens when those entrusted with taxpayer data fail to protect it?

Who Has Access to Your Tax Information?

When you file your taxes, you expect that your private financial details are handled with care. But government agencies don’t operate in a vacuum—they rely on contractors and external organizations to process, store, and manage data. Reports have indicated that the Department of Government Efficiency (DOGE) has extensive access to taxpayer information, along with numerous third-party contractors assisting the IRS, DOGE and other government agencies. That access, if not properly controlled, has the potential to lead to serious breaches of taxpayer privacy.

The Legal Framework: Your Rights Under Federal Law

Federal law is clear: taxpayer information is confidential. Under 26 U.S.C. § 6103, tax returns and return information cannot be disclosed except in specific, legally permitted situations. Any unauthorized disclosure—whether intentional or negligent—can lead to serious consequences, including civil and criminal penalties.

26 U.S.C. § 7431 gives taxpayers a path to seek damages if their confidential tax information is unlawfully shared. Even if a breach wasn’t intentional, failure to implement safeguards against unauthorized access can result in liability. In addition to federal protections, state laws often allow individuals to sue for privacy violations, such as the public disclosure of private facts.

Why This Matters: Real-World Legal Consequences

Recent litigation has tested these protections. Over several years, Charles Littlejohn, an employee of a contractor for the IRS, leaked substantial amounts of confidential taxpayer information to major media organizations.  Littlejohn was convicted and sentenced to five years in prison in 2024.  Multiple affected individuals sued the IRS and its contractors for this breach, including Ken Griffin and Kelcy Warren.  In response to and in settlement of Mr. Griffin’s lawsuit, the IRS issued a public apology. Most recently, in Warren v. Booz Allen Hamilton, Inc., a case pending before the United States District Court in Maryland, the court ruled that the plaintiff could pursue claims under § 7431 against Littlejohn’s employer, reinforcing the idea that contractors can potentially be held accountable for mishandling taxpayer information.

This case sets a powerful precedent. It signals to government agencies and their contractors that taxpayer privacy is not just a best practice—it’s the law. It also serves as a warning: when taxpayer data is misused, legal action can and will follow.

The Risks of Unchecked Access

The problem isn’t limited to one case. As the government increasingly relies on third-party contractors to manage taxpayer data, the risk of unauthorized disclosures grows. The broad access granted to DOGE and its affiliated contractors create additional vulnerabilities for potential privacy breaches. Without strict oversight, taxpayers remain exposed to data leaks that could result in identity theft, financial fraud, and reputational harm.

What You Can Do

For taxpayers, these legal battles underscore the importance of vigilance. If you suspect your tax information has been improperly accessed or disclosed, legal avenues exist to hold the responsible parties accountable. As attorneys, we’re adept at navigating the complex legal framework surrounding taxpayer confidentiality. Whether it’s pursuing claims under § 7431 or leveraging state privacy laws, legal action can serve as both a remedy and a deterrent against future violations.

Final Thoughts: Protecting the Integrity of the Tax System

Maintaining trust in the tax system requires more than just laws—it demands enforcement. As scrutiny on data security intensifies, government agencies and their contractors must prioritize taxpayer privacy. Holding those who mishandle confidential information accountable isn’t just about legal recourse; it’s about reinforcing the integrity of a system that millions of Americans rely on.

If you or your organization handle taxpayer information, now is the time to assess your compliance protocols. And if you’re a taxpayer affected by a breach, know that the law is generally on your side.

Reach out to a member of our Tax team with questions or to learn more here.

March 5, 2025