Disclosure and Use of Tax Return Information

1. Disclosure and Use ofTax Return Information Take effect 1/1/2009 § 7216 Final Regulation § 301.7216-1 Final Regulation § 301.7216-2 Final Regulation § 301.7216-3 Revenue Procedure 2008-35 TAM-1313 NTA 680 Presentation Developed by Honkamp Krueger & Co., P.C.

2. Why Pay Attention to this part of the seminar: If you fail to adhere to the new rules - • Civil Penalties: • $250 for each disclosure or use • Not to Exceed $10,000 each calendar year • Criminal Penalties: • Maximum Penalty of 1 year In Prison • Maximum Fine of $1,000 • Or Both (including costs of prosecution) Developed by: Honkamp Krueger & Co. P.C.

3. Disclosure vs. Use • Disclosure: • The act of making tax return information known to any person in any matter whatsoever • Use: • Any circumstance which a practitioner refers to or relies on tax return information • ie: providing a subsidiary with tax return information to sell investment services Developed by: Honkamp Krueger & Co. P.C.

4. Makeup of Consent • Must be a separate written document • Each disclosure or use consent needs to be contained on a separate written document • One sheet can not be used to consent to both uses and disclosures. • Special rule if multiple uses or disclosures are needed • Specifically and separately identify each disclosure or use to give taxpayer option to opt out • Must be on 8½ x 11 paper or larger using at least 12 point font • All text on that consent form must pertain only to the use or disclosure consent Developed by: Honkamp Krueger & Co. P.C.

5. Makeup of Consent • Mandatory Statements in Consent • Please see Revenue Procedure 2008-35 for required language • Section Four covers required paragraphs • These paragraphs are different depending on use or disclosure Developed by: Honkamp Krueger & Co. P.C.

6. Makeup of Consent • Must Include Affirmative Consent • Must Include a Signature • Paper – Signature must be made • Electronic – Special rules apply for electronic consents which apply to consents over the internet or through e-mail • Tax Preparer can not provide a consent form with blank spaces for taxpayer to complete related to the purpose of the consent Developed by: Honkamp Krueger & Co. P.C.

7. Makeup of Consent • Consent to disclose the entire return • These are allowed • The consent must provide that the taxpayer has the ability to request a more limited disclosure of tax return information as the taxpayer may direct • Multiple additional rules for using or disclosing data overseas. Developed by: Honkamp Krueger & Co. P.C.

8. In Summary of What Needs to be Included • Taxpayer name and Tax Preparer name • Intended Purpose of the Disclosure or Use • For Disclosure: • Identify recipient or recipients of tax return information • For Use: • Identify the particular use authorized • Include the specific information that will be used/disclosed up to and including the entire return • Signed and Dated by the Taxpayer as well as a copy of the consent given to the Taxpayer Developed by: Honkamp Krueger & Co. P.C.

9. Timing Rules for Consent • No retroactive consents • Tax Preparer may not request a taxpayer’s consent to disclose or use tax return information for purposes of solicitation of business unrelated to tax return preparation after the tax return preparer provides a completed tax return to the taxpayer for signature • If a taxpayer denies a consent request, the tax preparer may not request another consent with a “substantially similar” request • Consent can be specified for length of time in effect • If none specified, one year is assumed Developed by: Honkamp Krueger & Co. P.C.

10. Exceptions to RulesPermissible disclosures/uses without consent of taxpayer • Any disclosure to the IRS • Disclosures or uses for preparation of a taxpayer’s return • Tax return preparer located within the same firm in the United States • Disclosures to other tax return preparers • Preparer-to-Preparer • Can disclose information to preparer outside of firm to aid in auxiliary services in preparation, as long as those services are not “substantive determinations” affecting the tax liability • ie: when we send returns to third party to e-file the return Developed by: Honkamp Krueger & Co. P.C.

11. Exceptions to RulesPermissible disclosures/uses without consent of taxpayer • Disclosure or Use if Related Taxpayers • In preparing a return for B, you may use A’s information if: • B is related to A in the following ways: • Husband/Wife, Child/Parent, Grandchild/Grandparent, Partner/Partnership, Trust or Estate/Beneficiary or Fiduciary, Corporation/Shareholder or members of a controlled group • A’s interest in the information is not adverse to B’s interest in the information • A has not expressly prohibited the disclosure or use Developed by: Honkamp Krueger & Co. P.C.

12. Exceptions to RulesPermissible disclosures/uses without consent of taxpayer • By court order, administrative order, requests by a federal/state agency, US Congress, Professional Association Ethics Board or Public Company Accounting Oversight Board • For use in securing legal advice, treasury investigations or court proceedings Developed by: Honkamp Krueger & Co. P.C.

13. Exceptions to RulesPermissible disclosures/uses without consent of taxpayer • Certain disclosures by accountants and attorneys • A lawfully engaged tax preparer may use the taxpayer’s tax return information for the purpose of providing other legal or accounting services to the taxpayer • Accounting Services include preparation of books and records, working papers, or accounting statements or reports for the taxpayer • See §301.7216-2(h) for full rule for accountants Developed by: Honkamp Krueger & Co. P.C.

14. Exceptions to RulesPermissible disclosures/uses without consent of taxpayer • Information in preparation or audit of state, local or foreign tax returns/obligations • Payment for Tax Preparation Services • ie: use a credit card number given to pay, the preparer may use the return to get the name of the taxpayer • Retention of Records • For use in preparation of future returns Developed by: Honkamp Krueger & Co. P.C.

15. Exceptions to RulesPermissible disclosures/uses without consent of taxpayer • Lists for solicitation of tax return business • Should be solely the name, address, e-mail address and phone number • Only used to offer additional tax information or tax preparation services • For Quality or Peer Reviews • To report the commission of a crime • If due to tax preparer’s incapacity or death Developed by: Honkamp Krueger & Co. P.C.

16. Application of Rules for Returns • 1040 Series • Effective 1/1/2009 • All rules above apply • Non-1040 Series • Rules for non-1040 series are different Developed by: Honkamp Krueger & Co. P.C.

17. Application of Rules for ReturnsRules for Non-1040 Returns • Consent can be included in the engagement letter for non-1040 returns • Must include the client and tax preparer names • Must be signed and dated by client • Specific tax return information to be disclosed or used must be identified (same as 1040 requests) Developed by: Honkamp Krueger & Co. P.C.

18. Application of Rules for ReturnsRules for Non-1040 Returns • For Disclosure • Specify purpose and specific recipients • You can identify a descriptive class of recipients for non-1040 returns • For Use • Specify the specific products or services for which use is requested (same as 1040) Developed by: Honkamp Krueger & Co. P.C.

19. Summary • To gain a through understanding of these rules, you should read through the code, regulations and the revenue procedure. • § 7216 • Final Regulation § 301.7216-1 • Final Regulation § 301.7216-2 • Final Regulation § 301.7216-3 • Revenue Procedure 2008-35 • More information should be coming from the IRS on specifics on applying these rules. Developed by: Honkamp Krueger & Co. P.C.