IRS Faces Lawsuit Over Alleged Leak of Special Agent's Private Tax Data

- A veteran IRS criminal investigator says the agency leaked his private tax records to prosecutors.

- The case turns a whistleblower fight into a taxpayer-privacy warning shot.

- CPA firms should tighten internal access controls before client or employee data becomes a liability.

A veteran IRS agent is alleging that his own agency violated federal privacy laws by leaking his personal tax information to the Department of Justice. The lawsuit, filed in the U.S. District Court for the Northern District of Illinois, claims that IRS officials disclosed confidential personnel, disciplinary, and tax return information to prosecutors to characterize the agent as a liar. The agent, Brian Visalli, a 24-year veteran of IRS Criminal Investigation (IRS-CI) with 22 performance awards, alleges the disclosure was a retaliatory move following his whistleblowing activities regarding abusive tax shelters.

Visalli served as a lead agent on major tax shelter investigations and spent over a decade reporting concerns to the Treasury Inspector General for Tax Administration (TIGTA) and IRS leadership. His reports specifically addressed what he believed was a refusal by officials at the IRS's Chicago Field Office to investigate the promoters of abusive tax schemes marketed to wealthy individuals and corporations. These reports contributed to two published TIGTA audit reports. The lawsuit alleges that his career was targeted after he began reporting these internal systemic issues.

The complaint alleges that in October 2024, Visalli learned that DOJ Tax Division personnel were describing him as "impaired" under Giglio v. United States. A Giglio designation is a serious designation implying that a law enforcement witness has a credibility problem that must be disclosed to criminal defense counsel. The lawsuit asserts that no prosecutorial authority had actually made such a determination and that no Giglio letter had been issued at that time. Instead, the complaint alleges that the information reached the DOJ through an unauthorized disclosure of an internal investigation into Visalli's 2021 joint tax return.

The lawsuit highlights a series of seemingly contradictory actions by the IRS. In February 2025, the agency proposed a one-day suspension under a strict-liability charge, stating the official did not find the conduct intentional. The agency subsequently offered to resolve the matter with a reprimand and a counseling letter. Furthermore, an agency fact-finding memorandum in March 2026 concluded that Visalli's actions were not willful and that he had acted proactively on later tax returns. However, just 33 days later, the same official proposed his removal from federal service, citing the potential Giglio impairment that the lawsuit claims was manufactured by the leak itself.

The lawsuit brings claims under the Privacy Act and Internal Revenue Code provisions that mandate the confidentiality of taxpayer return information. Visalli's attorneys argue that tax privacy laws do not provide exceptions for agency employees who are deemed "inconvenient." The complaint alleges that the agency's actions violated the very laws that protect the privacy of every taxpayer's information. The lawsuit seeks actual, statutory, and punitive damages, as well as attorney fees and costs, citing harm including the loss of a performance award after 22 consecutive years of receiving one, along with medical expenses and legal costs.

At the heart of the complaint is the allegation that the IRS used its own internal investigative tools to discredit a whistleblower rather than addressing the underlying issues he reported. The lawsuit claims that the agency's handling of the underlying tax matter was inconsistent with the Giglio characterization. Despite the allegations of retaliation, Visalli's attorneys state he remains committed to his service and his whistleblowing efforts in fulfillment of his oath of office. The case, Visalli v. Internal Revenue Service, et al., is currently pending in the Northern District of Illinois.

This case underscores the extreme sensitivity of tax return data and the legal ramifications of unauthorized disclosures. For CPA firms, it serves as a stark reminder of the importance of rigorous internal controls over who can access sensitive client and employee data. As the IRS faces scrutiny over how it handles internal investigations and whistleblower reports, firms should ensure their own internal data privacy protocols are airtight to prevent any unauthorized access that could lead to reputational or legal liability.