All taxpayers are required to follow the letter of the tax law. But some individuals—such as IRS agents and other tax professionals like yourself—are often held to a higher standard. In a new case, Harris-Campbell, U.S. Fed. Ct. Appls. Dk. No. 24-1470, 8/20/26, a federal appeals court upheld the dismissal of an IRS supervisor who failed to pay her taxes.
Facts of the new case:
The taxpayer worked as an Accounts Manager and a Revenue Officer for the IRS before eventually rising to the position of Supervisory Revenue Officer. Personally, she began serving as the trustee for her goddaughter’s trust in 2011 following the death of the goddaughter’s mother in 2010.
By 2015, the taxpayer’s relationship with her goddaughter had deteriorated. Eventually, her goddaughter followed through on threats to report her to the IRS for accepting compensation or gifts in exchange for preparing tax returns. The goddaughter claimed the practice began as a “family thing’ but was subsequently extended to other acquaintances.
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The IRS takes the position that its own employees are held to a higher expectation of tax compliance since they are responsible for enforcing federal tax law, especially those working in a supervisory capacity. It encouraged the taxpayer to report the threats to the Treasury Inspector General for Tax Administration (TIGTA).
As a result, a TIGTA investigation determined that the taxpayer improperly claimed dependency exemptions (not allowed under current law) for:
- Her goddaughter as a dependent in tax years 2008 to 2014 despite not paying enough of her goddaughter’s expenses to warrant that categorization;
- Her goddaughter as her child in tax years 2008, 2009 and 2010;
- Her goddaughter as her stepchild in 2011; and
- Her goddaughter’s son as a dependent in tax year 2014 even though the majority of his expenses were paid by the goddaughter.
The taxpayer acknowledged to investigators that she knew that her actions were “technically illegal.” In addition, TIGTA found that the taxpayer improperly placed her goddaughter and her goddaughter’s son on her Federal Employee Program health insurance plan.
The TGTA investigation in turn triggered an IRS audit, verifying the false clams and resulting in a tax liability for the taxpayer, including interest and penalties, as well as a separate amount for the health insurance fraud. The taxpayer challenged these allegations in court. After the courts ruled in favor of the IRS, she was dismissed from her job.
But that wasn’t the end of the matter. The taxpayer appealed her termination to the Merit Systems Protection Board (“Board”). Initially, an administrative judge reversed the termination, but the IRS petitioned for a review of that reversal. Ultimately, the Board entered a final order reversing the initial decision and sustaining her removal. And now, at long last, the U.S. Court of Appeals for the federal circuit has affirmed that decision.
Moral of the story: Don’t try to “fudge” your tax responsibilities. Go above and beyond what’s routinely required to fully comply with the tax law in your professional capacity.
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Tags: Income Taxes, internal revenue service, IRS, irs agents, tax court, tax law, Taxes
