What are consents to disclose tax return information for Form 1040 (1040, 1040A, 1040EZ, 1040NR) tax returns?
A criminal penalty applies to knowing or reckless disclosure or use of tax return information, but the penalty doesn’t apply to disclosures allowed by the Code or regulations. IRS regulations divide permissible disclosures into those that require taxpayer consent and those that do not. The regulations enumerate specified disclosures or uses of tax return information that may be made without taxpayer consent (e.g., disclosures under the Code or under a court order, disclosures to IRS, disclosures for quality or peer reviews).
Consent form for Tax Preparers
The regulations also provide that in other situations a tax return preparer won’t be allowed to disclose or use a taxpayer’s tax return information before obtaining a written consent from the taxpayer, which must be knowing and voluntary. This protects the privacy of taxpayers.
Tax return information is broadly defined. It means any information, including, but not limited to, a taxpayer’s name, address, or identifying number, which is furnished in any form or manner for, or in connection with, the preparation of a taxpayer’s tax return.
Generally, conditioning the providing of any services on the taxpayer furnishing consent will make the consent involuntary and ineffective. However, a tax return preparer may condition its providing of preparation services on a taxpayer consenting to allow the tax return preparer to disclose the taxpayer’s tax return information to another tax return preparer for the purpose of performing services that assist in the preparation of, or provide auxiliary services in connection with the preparation of, the taxpayer’s tax return.
Consent to Disclose Tax Return Information
All consents to disclose or use tax return information must include the tax return preparer’s name and the taxpayer’s name, and must be signed and dated by the taxpayer. The consent must also specify the tax return information to be disclosed or used by the return preparer. If a taxpayer consents to disclose tax return information, the consent must identify the intended purpose of the disclosure and, generally, the consent must also identify the specific recipient (or recipients) of that information. If the taxpayer consents to having his tax return information used, the consent must describe the particular use authorized. If a tax return preparer to whom the tax return information is to be disclosed is located outside the U.S., the taxpayer’s consent must be given before disclosure. Consents to disclose or use tax return information for a taxpayer filing a Form 1040 series return are subject to more stringent requirements than those that apply to taxpayers filing other returns. The consent forms must include certain statements that exactly follow language specified by the IRS.
Giving SSN to Tax Preparer
The most stringent restriction on consents to disclose or use tax return information for a taxpayer filing a Form 1040 series return is a rule providing that a tax return preparer located in the U.S., including any U.S. territory or possession (U.S. preparer), isn’t allowed to obtain consent to disclose a taxpayer’s social security number (SSN) to a tax return preparer located outside the U.S. or any U.S. territory or possession (non U.S. preparer). Thus, if a U.S. preparer obtains consent from a taxpayer to disclose tax return information to a non U.S. preparer, the U.S. preparer won’t be allowed to disclose the taxpayer’s SSN, and the U.S. preparer will have to redact or otherwise mask the taxpayer’s SSN before the tax return information is disclosed outside the U.S.
The regulations provide exceptions that apply (a) if a U.S. preparer initially received or obtained a taxpayer’s SSN from a non U.S. preparer or (b) if a U.S. preparer obtains consent to disclose the taxpayer’s SSN to a non U.S. preparer through the use of an adequate data protection safeguard and verifies the maintenance of the adequate data protection safeguard in the request for the taxpayer’s consent