The IRS today issued a press release in defense of its proposed regs on safeguarding taxpayer information:
The IRS is committed to safeguarding taxpayers’ information. The tax information held by the IRS is private and protected. A proposed rule change would strengthen taxpayers’ control over their tax information now in the hands of tax preparers or tax software companies. The proposed rule says the taxpayers should receive proper warnings and consent notices that allow them to make an informed decision over the disclosure or use of their tax information by their preparer.
See also:
BACKGROUND INFORMATION
- Federal law prohibits tax return preparers from disclosing information given to them by their customers except in limited circumstances. This rule (set forth in section 7216 of the Internal Revenue Code) applies to private return preparers and is in addition to the strong protection provided by section 6103 against disclosure of return information by the government.
- Current regulations under section 7216, largely unchanged since 1974, permit return preparers to disclose their customers’ tax return information to third parties if the customer gives consent. The current regulations also set forth, in summary terms, the form of the consent the customer must give.
- Since 1974, the manner in which tax returns are prepared has changed dramatically and the rules governing customer consent are in dire need of updating. For example, internet-based return preparation was non-existent in 1974, so an updated rule needs to be published to address customer consent in that context.
- In December 2005, the Treasury Department and the IRS issued proposed rules to update the 1974 regulations.
- Contrary to some recent press reports, the proposed rules significantly tighten existing requirements regarding the customer consent a return preparer must obtain to disclose the customer’s tax return information to third parties.
- Under the proposed rules, if a return preparer wants to obtain consent, it must give the customer a strong warning. The mandated language for the warning is attached. Existing rules contain no such warning.
- The proposed rules add a number of limitations on the customer’s consent, including limiting the time period over which the customer’s consent is valid, and mandate that the provision of return preparation services cannot be conditioned on giving a consent. These limitations do not exist under the current rules.
- The proposed rules have a separate customer consent provision that applies to return preparers who outsource their work overseas.
- Numerous comments have been received on the proposed rules and a public hearing on them is scheduled for April 4, 2006. After the hearing, the Treasury Department and IRS will consider all comments and finalize a rule that takes them into account.
Proposed mandatory taxpayer consent language:
We (tax preparers) generally are not authorized to disclose your tax return information for purposes other than the preparation and filing of your tax return. We may disclose your tax return information for other purposes only if you consent to each specific disclosure. Your consent is valid for one year.
Warning: Once your tax return information is disclosed to a third party per your consent, we have no control over what that third party does with your tax return information. If the third party uses or discloses your tax return information for purposes other than the purpose for which you authorized the disclosure, under Federal tax law, we are not responsible for that subsequent use or disclosure, and Federal tax law may not protect you from that disclosure.
If you believe that your rights have been violated
If you have any questions or concerns about your rights regarding the use or disclosure of your tax return information, visit http://www.irs.gov/advocate for more information, or contact the Taxpayer Advocate Service of the Internal Revenue Service at 1-877-777-4778.
If you believe we have used or disclosed your information without your permission, you may contact the Treasury Inspector General for Tax Administration at 1-800-366-4484.
