The Internal Revenue Service heard from a variety of groups on a proposed rule change that the agency says would strengthen taxpayer control over tax information in the hands of tax preparers or tax software companies.

The IRS released a primer outlining its perspective on the proposal recently, after several consumer groups accused the agency of deliberately keeping the discussion below the radar screen of the public.

A trio of consumer groups wrote to the IRS last month, asking for the proposal to be dropped and worrying that the changes would allow commercial tax preparers to share and sell confidential taxpayer information to third-party marketers and database brokers.

The IRS said that the new rule would make it clearer to consumers that their tax information might be shared -- spelling out specific language about the sharing of information, and serving as a warning to filers. In electronic filings, the consent agreement will now appear alone on one screen, in at least 12-point type. Both the IRS and the Treasury Department have said that changes are necessary, because the current consent procedure has not been updated since 1974.

Larger tax preparation operations with corporate affiliates are already able to share information with third parties -- the new regulation would allow even small preparers to share or sell information.

The American Insitute of CPAs, which was among the groups testifying yesterday, issued a release noting that the insitute's Professional Code of Conduct explicitly requires members to notify taxpayers if it is necessary to provide any of the taxpayer's information to an individual or entity not directly involved in the preparation of the return.

"Although this proposed change in language does reflect a slight liberalization of the current rules, given that it is applicable only under limited circumstances, many people would not consider this a significant loosening," the AICPA said, in the statement. The institute also clarified that unlike claims made by some consumer groups, with the taxpayer's advance permission, current regulations already allow accountants to share taxpayer information with a party unrelated to the tax preparer or the taxpayer under a variety of circumstances.

The IRS's background information on the proposal is available at www.irs.gov/newsroom/article/0,,id=155793,00.html.

The AICPA's backgrounder is available at www.aicpa.org/download/news/2006/AICPA_Backgrounder.pdf.

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