Taxpayer Privacy – Know Your Rights
The Internal Revenue Service and the Treasury Department have released final regulations and a revenue procedure requiring tax preparers to obtain consent before they can distribute taxpayer information to third parties, along with a proposal to restrict the marketing of refund anticipation loans and similar products.
Preparers must obtain a taxpayer’s consent, either by paper or electronically, before tax return information can be disclosed to any third party or used for any purpose other than filing the return. If the taxpayer agrees to the disclosure and use of personal information, the consent must identify the intended purpose of the disclosure, identify the recipients and describe the particular authorized disclosure or use of the information.
Taxpayers must also be informed that they are not required to sign the consent. If they sign the consent, they have to be told that federal law may not protect their information from further disclosure, and that if they sign the consent, they can set a time period for the duration of that consent. If taxpayers don’t set a time period, the consent is valid for up to one year.
The rules require the paper consent documents to be in 12-point type on 8-1/2 by 11-inch paper so taxpayers don’t miss the fine print. Electronic consent requests have to be in the same type as the Web site’s standard text so they are equally visible.
If a taxpayer declines to consent to have their information disclosed or shared, the preparer cannot try to pressure the taxpayer by repeating the consent request. Consent from taxpayers is also required if the tax information will be sent outside the United States for processing. If the return is sent offshore, the individual taxpayer’s Social Security number must be redacted.
The IRS also proposed restricting the marketing of refund anticipation loans, pointing out that RALs provide tax preparers with a financial incentive to take improper tax positions in order to inflate the refund claims. There is a 90-day comment period on the proposal.