"Conscious ignorance" Does Not Protect IRS Employee From Removal

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The Internal Revenue Service typically comes down hard on any of its employees who play fast and loose with their federal income tax returns. Usually this is a firing offense. A recent appeals court decision illustrates the agency’s harsh dealings with tax cheats among its ranks. (Morrissey v. Department of the Treasury, C.A.F.C. No. 2009-3044 (nonprecedential), 4/2/09)

Ms. Morrissey was a contact representative with the IRS. Her husband had held the same type of position with the agency until he retired and went into his side real estate business full time.

The husband and wife filed joint tax returns. Shortly after Ms. Morrissey was hired by the agency, she was subjected to a routine tax audit—apparently this is standard practice with any new IRS employee. During this audit, the Morrisseys were cautioned about improper Schedule A and C deductions claimed from the husband’s real estate business. However, on the next few years’ returns the Morrisseys continued to claim similar improper deductions on Schedules A and C.

Eventually the agency removed Ms. Morrissey for the improper federal tax returns. Federal law requires the removal of any IRS employee who willfully understates tax liability unless “due to reasonable cause and not willful neglect.” (Opinion pp. 1-3)

Ms. Morrissey argued on appeal that this legal requirement should not apply since she did not willfully make the errors on the tax return. She pointed out that her husband prepared the returns even though she signed them. She also argued that she had no special training in understanding Schedule A and C deductions. The appeals court flatly rejects her contentions. The court finds, “Conscious ignorance is not reasonable cause.” (p. 4)

The court also does not buy the argument that Ms. Morrissey should be off the hook because her husband is the one who prepared the returns. It points out that she was informed that her earlier tax returns “were problematic…Mrs. Morrissey at least knew that past joint tax returns prepared by her husband were suspected of inaccuracy” and she should have sought help available to all employees from the agency in making sure her future returns were correctly done. (pp. 4-5)

The court acknowledges the “heightened responsibility to file accurate tax returns” that automatically goes with her IRS job that is “based on her general duty to safeguard public trust in the IRS and avoid the perception of a breach of trust in IRS employees.” (p. 5)

The court exhibits no sympathy whatsoever for Morrissey who admitted to having “looked over” the return before signing but making no effort to confirm the information presented on the return.: “Signing her joint tax returns without making any effort to verify their accuracy was willful neglect under the circumstances of this case.” (p. 5)

© 2017 Susan McGuire Smith. All rights reserved. This article may not be reproduced without express written consent from Susan McGuire Smith.


About the Author

Susan McGuire Smith spent most of her federal legal career with NASA, serving as Chief Counsel at Marshall Space Flight Center for 14 years. Her expertise is in government contracts, ethics, and personnel law.