Helena, Montana – A bipartisan effort in the U.S. Senate is seeking to strengthen protections for taxpayer data by imposing much tougher penalties on individuals and contractors who improperly disclose confidential information collected by the Internal Revenue Service.
Montana Sen. Steve Daines and Nevada Sen. Catherine Cortez Masto have introduced legislation aimed at increasing both criminal and civil consequences for the unauthorized release of taxpayer information.
The proposal would amend the Internal Revenue Code of 1986 and comes amid growing concerns about the security of sensitive financial records maintained by the federal government.
According to the lawmakers, taxpayers should be able to trust that personal information submitted to the IRS will remain protected and secure.
“One of the IRS’s most important responsibilities is protecting the confidentiality of taxpayer information. The last thing hardworking Americans should have to worry about is their tax information being breached or leaked. I’m proud to work with Senator Cortez Masto on this bill to protect taxpayer privacy rights and crack down on criminals who try to take advantage of the system,” said Daines.
Bill would sharply increase penalties
Current law imposes a maximum criminal penalty of a $5,000 fine and up to five years in prison for unauthorized disclosure of tax return information. Under the proposed legislation, those penalties would increase dramatically.
The bill would raise the maximum fine to $250,000 and increase the potential prison sentence to as much as seven years for individuals found guilty of improperly releasing taxpayer information.
Lawmakers say the tougher penalties are intended to discourage misconduct and ensure that those who mishandle sensitive records face serious consequences.
The legislation also focuses on government contractors who work with taxpayer data on behalf of the IRS. As the agency increasingly relies on outside companies and contractors, the senators argue that additional safeguards are needed to protect Americans’ private information.
“When Americans pay their taxes, they are entrusting the government with extremely sensitive information – everything from Social Security numbers to banking details. As the IRS relies more heavily on government contractors, we need to do more to ensure they don’t mishandle taxpayer information. This bipartisan legislation will hold bad actors who put everyday Americans’ data in harm’s way accountable,” said Cortez Masto.
New consequences for contractors
A key section of the proposal would create a new felony offense for IRS contractors who intentionally fail to enforce privacy protections required under federal law.
The legislation would establish severe financial penalties for contractors found responsible for such violations. Those penalties could reach $500,000 or 25 percent of the total value of all IRS contracts held by the contractor during the first fiscal year in which access to the taxpayer information was granted, whichever amount is greater.
The bill would also strengthen civil remedies available to taxpayers whose information is improperly disclosed.
Currently, minimum statutory civil damages are set at $1,000 for each unauthorized disclosure. Under the proposed legislation, that minimum amount would increase to $5,000 per violation.
Supporters of the measure argue that stronger penalties are necessary because taxpayer records often contain highly sensitive information, including Social Security numbers, financial account details, income records, and other personal data that could be exploited if exposed.
If approved by Congress, the legislation would significantly expand the consequences for individuals and organizations that fail to protect confidential taxpayer information, while reinforcing the expectation that sensitive IRS records remain secure and private.
