The Internal Revenue Service has modified the mandatory language that tax preparers need to use when asking consent from their clients to use or disclose their tax information.
Revenue Procedure 2013-14 follows on the heels of finalized regulations for how tax preparers can use and disclose such information (see IRS Finalizes Rules on Use and Disclosure of Taxpayer Information). It applies to tax preparers whose clients file 1040 series returns, according to the Journal of Accountancy, and includes requirements for when clients use electronic signatures to consent to the use or disclosure of their tax information. The new revenue procedure modifies and supersedes earlier rules from 2008. Rev. Proc. 2013-14 modifies the mandatory language required on each taxpayer consent to disclose or consent to use tax return information and also explains the difference between tax return preparation services (or auxiliary services) and other financial or accounting services.
“Some taxpayers have expressed confusion regarding whether they needed to complete consent forms to engage a tax return preparer to perform tax return preparation services,” said the IRS. “The modified mandatory language required in consent forms clarifies that a taxpayer does not need to complete a consent form to engage a tax return preparer to perform only tax return preparation services. To allow a tax return preparer to disclose or use tax return information in providing services other than tax return preparation, however, a taxpayer must complete a consent form as described in this revenue procedure.” The modified language must be included on each consent to disclose or use tax return information.
The IRS includes several examples to reflect the modified language. For example, a consent may say, “Federal law requires this consent form be provided to you. Unless authorized by law, we cannot disclose your tax return information to third parties for purposes other than the preparation and filing of your tax return without your consent. If you consent to the disclosure of your tax return information, Federal law may not protect your tax return information from further use or distribution. You are not required to complete this form to engage our tax return preparation services. If we obtain your signature on this form by conditioning our tax return preparation services on your consent, your consent will not be valid. If you agree to the disclosure of your tax return information, your consent is valid for the amount of time that you specify. If you do not specify the duration of your consent, your consent is valid for one year from the date of signature.”
The consent form may be on paper or in electronic format. An electronic consent form must be provided on one or more computer screens. All of the text placed by the preparer on each screen needs to pertain only to the disclosure or use of tax information authorized by the consent, except for computer navigation tools. The size of the text must be at least the same size as, or larger than, the normal or standard body text used by the Web site or software package for direction, communications, or instructions, and there needs to be sufficient contrast between the text and background colors.
Section 7216(a) of the Tax Code imposes criminal penalties on tax preparers who knowingly or recklessly make unauthorized disclosures or uses of information from their clients' tax returns without their consent. A violation is a misdemeanor, but nevertheless carries a penalty of up to one year in prison or a fine of up to $1,000, or both, together with the costs of prosecution. There are also related civil penalties of $250 for each disclosure or use, not to exceed $10,000 a year.