Information: Model Practices Related to Regulation 7216 January 13, - PowerPoint PPT Presentation

Consent to Use and Consent to Disclose Tax Return Information: Model Practices Related to Regulation 7216 January 13, 2015 1-2pm ET, 12-1pm CT, 11-12n MT, 10-11am PT

Welcome Fran Rosebush Assets & Opportunity Network, Taxpayer Opportunity Network CFED Join the new Taxpayer Opportunity Network at: http://cfed.org/programs/taxpayer_opportunity_network/join

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Today’s Speakers Francesca Jean Baptiste Senior Program Manager, Maryland CASH Campaign Steve Holt Consultant, Taxpayer Opportunity Network Principal, HoltSolutions

Maryland CASH Campaign  Non-profit organization that promotes programs, policies and products to increase the financial security of low-to moderate income individuals and families across the state of Maryland  Works with partners in 18 of the 24 Maryland counties to provide EITC outreach and free tax preparation through VITA

Lessons Learned  Don’t assume that everyone knows what Internal Revenue Code Section 7216 is  Having sample language is helpful but one size doesn’t fit all  Very important to plan ahead around data usage

Section 7216 Basic Concepts  Information taxpayer gives to the IRS is known only by the IRS (& the return preparer)  Up to taxpayer to allow (consent to) other uses or any sharing of that information  (with a few very specific exceptions)  Very specific rules for how taxpayer can give consent

The Rules  Internal Revenue Code Section 7216  Treasury Regulations Section 301.7216  7216-1: Penalty for disclosure or use of tax return information  7216-2: Permissible disclosures or uses without consent of the taxpayer  7216- 3: Disclosure or use permitted only with taxpayer’s consent  IRS Revenue Procedure 2013-14  IRS Publication 4299 ( Privacy and Confidentiality – A Public Trust )

The Penalties  Tax return preparers who knowingly or recklessly disclose or use tax return information for a purpose other than preparing a tax return are subject to: ○ Misdemeanor ○ Up to 1 year imprisonment, and/or ○ Up to $1,000 fine ○ Civil penalty of $250 per prohibited disclosure or use (up to $10,000 maximum)

“Tax Return Preparer”  Anyone engaged in business of preparing or assisting in preparing tax returns  Whether or not it’s the principal business activity  Whether or not a fee is charged  Includes:  VITA sites  Intake, quality review, transmission  Excludes:  Organizations providing space to VITA

“Tax Return Information”  Any information obtained in connection with tax return preparation  Includes:  Anything taxpayer would not have furnished but for intending to engage the tax return preparer  Anything provided by 3 rd parties (IRS acknowledgement or rejection)  Statistical compilations ( MORE ON THAT LATER )  Excludes:  Information obtained/retained for other purposes, to the extent it is not used to populate a tax return

“Use”  Return preparer refers to or relies upon tax return information as the basis to take or permit an action  For example:  Offering services or making referrals based on something on or obtained for the tax return  Communicating with subsets of taxpayers based on something on or obtained for the tax return  Taking information from the tax return to complete another form or application

“Disclosure”  Making tax return information known to any 3 rd party in any manner  For example:  Making referrals based on something on or obtained for the tax return  Sending applications completed based on something on or obtained for the tax return  Sharing data with community tax partners

Exception to Consent: Mailing List  To solicit additional return preparation services  To provide tax or general business or economic information for educational purposes  Contains everyone or no one: tailoring a mailing list is a use requiring consent  List can contain: name, address, e-mail, phone number, type of business entity or individual, tax form number (but not which return schedules used)

Exception to Consent: Statistical Information (Test 1 - for either Use or Disclosure )  Need for data must relate directly to:  Internal management, or support, of preparer’s return preparation business, or  Bona fide research or public policy discussions concerning state or federal taxation  If so, can produce & use a statistical compilation

Exception to Consent: Statistical Information (Test 2 – for Disclosure)  Data must be anonymous (cannot be associated directly or indirectly to a particular taxpayer)  No data describing characteristics of a group of fewer than 10 taxpayers  Marketing & advertising disclosures cannot identify dollar amounts of refunds, credits, or deductions (or percentages)  Exemption for volunteer programs and 501(c) organizations if disclosure made in support of fundraising activities

2 Ways to Obtain Consent 1. DIY (Do-It-Yourself) with your own forms, following the regulatory requirements  More flexible for providing full explanations to taxpayers & for authorizing multiple uses/disclosures  Requires way to flag returns in the tax data set to signify grant or denial of consent 2. Use forms in TaxWise (or other software)  Most regulatory requirements satisfied by the form  But very little space for Use & Disclosure descriptions

DIY: Regulatory Requirements (p.1)  Consent to Use and Consent to Disclose must be separate forms  Can have multiple Uses or Disclosures on single form, and forms can be multiple pages in length  8 ½ x 11 paper, 12 point or larger type  Name of taxpayer and name of return preparer  Specify particular Use involved, or intended purpose of Disclosure and to whom  No text that does not pertain to use or disclosure

DIY: Regulatory Requirements (p.2) Language that must appear in Consent to Use: “ Federal law requires this consent form be provided to you. Unless authorized by law, we cannot use your tax return information for purposes other than the preparation and filing of your tax return without your consent. 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. 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.” “If you believe your tax return information has been disclosed or used improperly in a manner unauthorized by law or without your permission, you may contact the Treasury Inspector General for Tax Administration (TIGTA) by telephone at 1-800-366-4484, or by e-mail at complaints@tigta.treas.gov .”

DIY: Regulatory Requirements (p.3) Language that must appear in Consent to Disclose: “ 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 this 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 .” “If you believe your tax return information has been disclosed or used improperly in a manner unauthorized by law or without your permission, you may contact the Treasury Inspector General for Tax Administration (TIGTA) by telephone at 1-800-366-4484, or by e-mail at complaints@tigta.treas.gov .”

DIY: Regulatory Requirements (p.4)  Affirmative statements only (cannot be set up as an “opt - out”)  If multiple Uses or Disclosures on form, opportunity for separate consent for each  Specify duration of consent (default is 1 year from date of signature)  Signed by taxpayer  Taxpayer gets executed copy of consent at time of signing

DIY: Tracking Provision of Consent  Must ensure that tax return data will not be used or disclosed when consent is not given  Set up field in data for each consent to flag as either “Consent granted” or “Consent denied”  TaxWise Preparer’s Use Fields provide easy way to do this

Example – Baltimore CASH Campaign

TaxWise Custom Use Fields

TaxWise Preparer Use Form