Disclosure and use of your tax return information
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Federal law requires your tax preparer to obtain your consent before we use or disclose your “tax return information”. Tax return information is all the information we obtain from you or other sources in any form or manner that is used to prepare your income tax return, or that is obtained in connection with the preparation of your return.
It also includes: (1) All computations, worksheets and printouts your tax preparer creates. (2) Correspondence from the Internal Revenue Service or Franchise Tax Board regarding the preparation, filing and correction of your tax returns. (3) Statistical compilations of tax return information. (4) Tax return preparation software registration information.
The tax code includes safeguards regarding the transfer and use of your personal tax return information. These rules state that you control your tax return information, not your preparer, not the government tax filing agencies. The rules ensure that you know who your tax return information may be shared with, both with or without, your consent. Unless the law allows otherwise, your tax preparer cannot disclose your tax information to any third parties other than for the purpose of preparing your tax returns without your signed permission.
Certain disclosures to third parties require your consent. These include disclosures to your mortgage lender, attorney, bank representatives, etc. Therefore, before your tax preparer can release information to a third party, the preparer will require written consent from you. You may determine the time you would like the consent to release information to expire. If you do not provide a specific date, your consent will lapse one year after the date you signed the form.
This same logic protects your tax data when your tax preparer seeks to assist you in resolving tax issues with the Internal Revenue Service (IRS) or the Franchise Tax Board (FTB).
It is frustrating when you get a letter from the tax agencies, your preparer has the answer to resolve the issue, but the tax agency will not talk to them unless you sign a power of attorney form authorizing the IRS or FTB to release information about your account to the preparer, or to allow the preparer to act on your behalf to resolve the issue. This seems funny when the tax preparer already knows all the information because they prepared the tax return, but the law is the law.
Consents to disclose your tax return information (paper or electronic) must contain the following information: (1) your name. (2) The nature of the disclosure. (3) To whom the disclosures will be made. (4) Details of the information being disclosed. (5) The particular use authorized. (6) The product or service for which the tax return information will be used. (7) When the authorization is to expire, if shorter than the one year period.
There are also uses of your tax return information which do not require your consent. These include providing information to other U.S. based tax return preparers assisting in the preparation of your return (if any are used); disclosures to the IRS, FTB, or other taxing jurisdictions; disclosures permitted under another provision of the Tax Code; disclosures to the courts; and disclosures for the purpose of obtaining legal advice.
As you can see the government loves to stick their nose into our business. In some cases their meddling is beneficial, in others it merely complicates the procedures we must follow.
Either way you are now more aware of the rules that must be followed.
