2.2 Disclosure of taxpayer information

Question 1

penalty

Answer 1

1. a penalty is imposed on any tax return preparer who discloses or uses any tax return information without the consent of the taxpayer other than for the specific purpose of preparing, assisting in preparing or providing services in connection with the preparation of any tax return of the taxpayer.
2. the penalty is $250 per disclosure, with a maximum of $10,000 per year
3. if convicted of knowingly or recklessly disclosing the information, a preparer would be guilty of a misdemeanor and subject to up to $1,000 in fines and up to a year in prison

Question 2

a penalty for disclosure is not imposed if the disclosure was made…

Answer 2

1. Pursuant to other provisions of the code
2. to a related taxpayer, provided the taxpayer has not expressly prohibited disclosure
3. pursuant to a court order
4. by one officer, employee, or partner to another officer, employee or shreholder or partner
5. to provide information for educational purposes
6. to solicit tax return preparation services
7. for the purpose of a conflict, quality or peer review.

Question 3

taxpayers consent to disclosure

Answer 3

1. the taxpayers consent must be a written, formal consent authorizing the disclosure for a specific purpose
2. the taxpayer must authorise a preparer to
   - use the taxpayers information to solicit additional current business matters not related to the IRS from the taxpayer
   - disclose the information to additional third parties
   - disclose the information in connection with another persons return.

Question 4

confidentiality privilege

Answer 4

1. the confidentiality privilege is extended to certain non-attorneys
   - in non criminal tax proceedings before the IRS, a taxpayer is entitled to the same common law protections of confidentiality, with respect to tax advice given by an “federally authorised tax practioner”, as a taxpayer would have if the advising individual were an attorney.

essentially if we dispense tax advice to a client, it is considered privileged and we cannot be compelled by the IRS nor federal court to disclose the communications. you will note this is limited only to what matters we practice before the IRS and does not cover any written communications regarding tax shelters

Question 5

why is some advice not protected by privilege?

Answer 5

the federally authorised tax practioner privilege protects advice only against disclosure to the IRS, not other government agencies

Question 6

There is no penalty if…

Answer 6

there is disclosure of information for the purpose of conflict, quality or peer review.

Question 7

there is a penalty if…

Answer 7

they disclose information to a relative despite them asking the preparer not to