Section 7216 Consent Form Walkthrough

For taxpayers who file a Form 1040 series return, Revenue Procedure 2013-14 prescribes the format of a section 7216 consent and statements that must appear in it, in sequence. This walkthrough follows the situation offshore preparation creates: a firm in the United States disclosing return information to another preparer, outside the United States, who helps prepare the return. It is a guide to the requirements, not a form to copy without advice.

Format

• A separate document. The consent is its own written document, on paper or on screen. It may be attached to an engagement letter. A consent to disclose and a consent to use are separate documents.
• On paper: sheets of 8½ by 11 inches or larger, every word on the sheet about the disclosure being authorized, and all text in at least 12 point type.
• On screen: text at least the size of the standard body text used by the website or software, with sufficient contrast, able to be signed and dated, and printable.
• Affirmative. The taxpayer must choose to consent. A form that makes them opt out is not valid.
• No blanks. A preparer may not alter a consent after it is signed, so it cannot be presented with blanks to fill in later.

What every consent identifies

• The name of the tax return preparer and the name of the taxpayer.
• The purpose of the disclosure and the recipient.
• The specific tax return information to be disclosed. A consent to disclose the entire return must say the taxpayer can ask for a more limited disclosure.
• The taxpayer's signature and the date.

The mandatory statements, quoted

For a disclosure to another preparer who assists in preparing the return, section 5.04(1)(b) requires these two paragraphs, in this order. The preparer's name may replace "we" or "our".

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 those related to the preparation and filing of your tax return without your consent. If you consent to the 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. Because our ability to disclose your tax return information to another tax return preparer affects the tax return preparation service(s) that we provide to you and its (their) cost, we may decline to provide you with tax return preparation services or change the terms (including the cost) of the tax return preparation services that we provide to you if you do not sign this form. 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.

Every consent must also contain the statement in section 5.04(1)(d):

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 email at complaints@tigta.treas.gov.

The statement about a preparer outside the United States

When the Social Security number is not included, or is fully masked, section 5.04(1)(e)(i) requires:

This consent to disclose may result in your tax return information being disclosed to a tax return preparer located outside the United States.

When the Social Security number is included and not fully masked, section 5.04(1)(e)(ii) requires the statement below instead, with the words from "including" to "(“SSN”)" underlined:

This consent to disclose may result in your tax return information being disclosed to a tax return preparer located outside the United States, including your personally identifiable information such as your Social Security Number (“SSN”). Both the tax return preparer in the United States that will disclose your SSN and the tax return preparer located outside the United States that will receive your SSN maintain an adequate data protection safeguard (as required by the regulations under 26 U.S.C. section 7216) to protect privacy and prevent unauthorized access of tax return information. If you consent to the disclosure of your tax return information, federal agencies may not be able to enforce United States laws that protect the privacy of your tax return information against a tax return preparer located outside of the United States to whom the information is disclosed.

An adequate data protection safeguard

A Social Security number may only go offshore with consent when both preparers maintain an adequate data protection safeguard when consent is obtained and when the disclosure is made. Section 5.07 describes it as a management approved and implemented security program, policy and practice with administrative, technical and physical safeguards, meeting or conforming to one of these frameworks:

1. The United States Department of Commerce safe harbor framework for data protection, or a successor program.
2. A foreign law data protection safeguard that includes a security component.
3. A financial or similar industry specific standard for technology and security that is generally accepted in that industry.
4. The AICPA/CICA Privacy Framework.
5. The most recent IRS Publication 1075.
6. Any other data security framework giving the same level of privacy protection.

Signing electronically

Section 6 allows three ways to sign an electronic consent. In each, the taxpayer must type something themselves; the software may not fill it in so that one click is enough.

• A personal identification number of at least five characters, assigned to the taxpayer and typed in by them.
• The taxpayer's name, typed in and then submitted.
• Any other entry of five or more characters unique to the taxpayer that the preparer uses to verify identity, such as the answer to a shared secret.

A working checklist

1. Decide whether Social Security numbers will be masked, and choose the matching statement.
2. Prepare the consent as a separate document with every mandatory statement in sequence.
3. Name the recipient and the information to be disclosed.
4. Obtain an affirmative, signed and dated consent before anything is shared.
5. Record the duration, which is one year from signature unless the consent says otherwise.

Sources

• Revenue Procedure 2013-14, sections 5 and 6
• 26 CFR 301.7216-3

General information for accounting professionals, not legal or tax advice. Confirm requirements against current law and IRS guidance.