The IRS recently released T.D. 9375, final regulations regarding the disclosure or use of tax return information by tax return preparers; and a related revenue procedure. The new regulations provide guidance relating to disclosures or use of return information under Code sections 7216 and 6713. In releasing the new regulations the IRS stated that the guidance will “bring taxpayer consent requirements into the electronic age,” the first update in the regulations in more than 30 years. T.D. 9375 has an effective date of January 1, 2009, providing preparers one year to make any necessary changes regarding their professional practices.
Proposed regulations (REG-136596-07) were also released by the Service addressing the marketing of refund anticipation loans and certain other products in connection with preparation of a tax return.
Some of the major tenets or provisions of the TD 9375 are as follows:
1. Within appropriate limits and safeguards, the regulations validate that the taxpayer continues to maintain the ability and the right to direct a preparer to disclose tax return information as the taxpayer sees fit.
2. The regulations clarify that return preparers may disclose return information to the IRS for any purpose.
3. The outsourcing of tax return information to a location outside the U.S. is a permissible disclosure if the taxpayer consents to such disclosure. However, in general, the preparer located inside the U.S. is not permitted to obtain consent to disclose a taxpayer’s Social Security Number to the foreign preparer, and this U.S. based preparer must redact or otherwise mask the taxpayer’s SSN before the return information can be disclosed to the overseas preparer.
4. With respect to large corporations and other “large taxpayers,” tax return preparers are permitted to obtain the taxpayer’s consent for the disclosure or use of return information through the use of an engagement letter.
5. The Service has released Rev. Proc. 2008-12, which generally complements TD 9375 by providing guidance regarding the content of certain consents to disclose and use tax return information.