Temp. Regs. Give Guidance on Return Preparer Information Disclosures

The Service released final and temporary regulations that govern the disclosure of a taxpayer’s Social Security number to overseas return preparers (T.D. 9409; REG-121698–08). Under the temporary regulations, such disclosure will be permitted in limited cases, with the taxpayer’s consent.

Return preparers are generally forbidden to disclose a taxpayer’s Social Security number to any return preparer located outside the United States or to seek a taxpayer’s consent to such a disclosure (Regs. Sec. 301.7216-3(b)(4)). The new regulations provide that a tax return preparer within the United States may (with the taxpayer’s consent) disclose a Social Security number to a tax return preparer located outside the United States when both tax return preparers maintain an ‘‘adequate data protection safeguard’’ and the tax return preparer located within the United States verifies the maintenance of the adequate data protection safeguards in the request for the taxpayer’s consent.

Rev. Proc. 2008-35 describes what “adequate data protection safeguards” are and gives rules for the form and content of a taxpayer’s consent.

The regulations are designed to reduce security risks (from loss of the taxpayer’s Social Security number) while still allowing overseas preparers to have access to the Social Security number in certain circumstances. Scenarios in which an overseas preparer might need access to the taxpayer’s Social Security number include, for example, when the overseas preparer is the signing preparer or needs an unredacted copy of the taxpayer’s return in order to help the taxpayer receive treaty benefits from a foreign country.

The regulations also clarify that the general prohibition regarding disclosure of Social Security numbers applies only to those taxpayers filing a return in the Form 1040 series. The regulations were effective July 2, 2008.