A registered tax agent is required to follow a regulation of the IRS relating to disclosure of the tax information supplied by clients. This is one of the standards of enrolled agent ethics. Tax professionals who fail to comply with the IRS regulation may incur a $1,000 fine and one year in jail for each violation.
All tax preparers must receive a client’s permission to use tax information for any purpose other than preparing and filing a tax return. A client must sign a form for Consent to Use of Tax Return Information explaining this regulatory requirement before preparation of the tax return. This provides the client with control over the use of his tax information for purposes such as determining applicability for the client of bank loans or other financial products. By signing the Consent to Use of Tax Return Information, a client authorizes the tax professional to analyze the feasibility of making these products available while preparing the tax return. The continuing education enrolled agents complete annually provides access to the content of this form.
The Consent to Use of Tax Return Information informs clients that the tax preparer cannot release the client’s tax information unless authorized by law. If the client consents to having his information disclosed, federal law is limited in the protections it provides for further use or distribution of that information. Tax preparers are not entitled to obtain a client’s consent on the form as a condition of rendering the tax preparation services. A tax agent course involving professional ethics explains the importance of this policy.
The Consent to Use of Tax Return Information states that tax professionals obtaining a signature as a condition of preparing the tax return has the same legal effect as lacking a signature.
In addition, the client of a tax professional must specifically consent to the release of tax information to a third party, such as a bank. A tax preparer is required to obtain the client’s signature on the form for Consent to Disclosure of Tax Return Information before providing tax information to others. This form provides permission for the tax professional to submit information to specified third parties. Familiarity with all these forms and information privacy is a basic purpose of tax CPE.
