On January 3, 2008, the IRS released final regulations that govern the handling and release of taxpayer information by return preparers (TD 9375). The final regulations are the first update to the rules governing preparer disclosure and privacy requirements since 1974. Return preparers will have until January 1, 2009, to implement the new requirements.
The new rules affect only return preparers; they do not affect the strict rules governing how the IRS handles taxpayer information.
Under the new rules, preparers generally must obtain taxpayer consent, either by paper or electronically depending on how the return is being filed, before tax return information can be disclosed to any third party or used for any purpose other than filing the return. Such consent must identify the intended purpose of the disclosure, identify the recipients, and describe the particular authorized disclosure or use of the information.
The regulations include mandatory language that must be included in the consent informing individual taxpayers that (1) they are not required to sign the consent; (2) if they sign the consent, federal law may not protect their information from further disclosure; and (3) if they sign the consent, they can set a time period for the duration of that consent. If taxpayers fail to set a time period, the consent is valid for a maximum of one year. Consent requests on paper must be in 12-point type on 8½ × 11-inch paper. Elec-tronic consent requests on a website must be in the same type as the website’s standard text.
To protect taxpayers from being pressured with repeated consent re-quests regarding the same issue, if a taxpayer declines to provide consent for an unrelated tax preparation disclosure or use request, the preparer cannot make another similar consent request.
Finally, preparers must obtain consent from taxpayers before sending tax information to a preparer outside the United States. This is to ensure that taxpayers know when their returns are being sent offshore for preparation. In such cases, the regulations require that the taxpayer’s Social Security number be redacted.
