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

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House usekeeping keeping

Today’s Speakers

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

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

• utreach 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

• ne 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

• nly by the IRS (& the return preparer)

 Up to taxpayer to allow (consent to) other uses

• r 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

• f 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 3rd 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

• n 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 3rd party in any manner

 For example:

 Making referrals based on something on or

• btained 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)

• rganizations 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

• ur 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

• ur 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

• f 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,

• pportunity 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

Option 2: Using the TaxWise Forms

 Customize both forms as templates  Insert name & address of return

preparation organization

 Consent to Use – specify use & purpose  Consent to Disclose – specify disclosure

(what & to whom) & purpose

 Challenge: just 2 lines of 60 characters

each for use/disclosure & same for purpose

TaxWise – Consent to Use

TaxWise – Consent to Disclose

Sample Language for TaxWise Forms

Use

Compare household and income information from your tax return to eligibility criteria for ABC Program

Purpose

Help you know about the services and benefits you MAY be eligible to receive from ABC Program

Disclosure

Share with ABC Program that you MAY be eligible to participate based on information from your tax return

Purpose

Help ABC Program target their outreach to households most likely to be eligible for its services

Proceed With Care, But Don’t Be Afraid

 Rules are very specific  Means the very specific facts of particular

situations are very important

 Be thoughtful about your situation and the

processes you set up

 Remember this is all to protect the taxpayer,

who deserves to be protected

 Obtain legal counsel as appropriate

Questions & Answers

Next Steps

• Complete the brief survey
• Questions? Contact us at taxpayeropportunity@cfed.org

Thank You!