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Closing Agreement Overview
Employees of military contractors may face a number of tax-related issues that may even result in tax overpayment. Some of them may also have been coerced or compelled into signing a form that violates their taxpayer rights, such as a closing agreement, a consent to disclose, or a declaration. These forms may not be legally enforceable, violating contractors’ rights as a taxpayer, and they may be able to seek legal recourse.
What is a Closing Agreement?
Essentially, a closing agreement is a written agreement in which the taxpayer agrees to “permanently and conclusively” close a case with the Internal Revenue Service (IRS).
Unfortunately, some taxpayers who work for military contractors overseas may be coerced into signing a closing agreement when it is not beneficial for them to do so—indeed, when it may mean that they are essentially agreeing to forfeit their right to claim the Foreign Earned Income Exclusion that would save them a great deal of money.
Is a Closing Agreement Enforceable?
A closing agreement is not a contract, though it functions similarly. However, a closing agreement is not always enforceable. Indeed, the IRS has tried to enforce many closing agreements in the past and lost.
In particular, workers at the U.S. Pine Gap defense facility in Australia reportedly were coerced into signing closing agreements that stripped them of the ability to claim FEIE on their taxes. But these workers claim that they were compelled to sign these agreements—and they did so because they were facing threats or under duress, or while they were already living and working in Australia. In any of these situations, the closing agreement would be considered invalid.
Recently, a group of Pine Gap workers filed a class action lawsuit against a number of defense contractors—Northrup Grunman, AECOM, General Dynamics, and Raytheon Company—alleging that their employers advised them not to claim the FEIE on their taxes. Further, the lawsuit claims that an employee of the IRS illegally shared their taxpayer information with officials at Pine Gap.
Other Taxation Issues
In addition to being compelled to sign closing agreements, these employees may have been told by their employers or the IRS—falsely—that they cannot take Foreign Earned Income Exclusion (FEIE) on their income taxes. The FEIE exclusion would have saved contractors a great deal of money. In recent tax years, it would have allowed them to avoid taxes on more than the first $100,000 they made overseas.
Moreover, their right to confidentiality of their tax information may have been violated. Confidential taxpayer information was allegedly shared by an IRS agent with the HR departments of certain defense contractors.
Joining a Defense Contractors Tax Lawsuit Investigation
Employees of companies like AECOM, Boeing, E&M Technologies, Leidos, Raytheon, and more who work at U.S. military bases or similar facilities overseas may have had their taxpayer rights violated, and ended up significantly overpaying their taxes.
If you are an employee of a defense contractor working at military or Department of Defense installations overseas, and have experienced any of these tax issues, you may be able to join this class action lawsuit investigation. Employees working at the Pine Gap U.S. military installation in Australia may be particularly affected because of Australia’s position on Foreign Earned Income Exclusion.
