The date April 15 isn't necessarily affectionately mentioned by many Americans, as it represents more anxiety than joy. Even for those who may be entitled to an income tax refund when they file their tax return each year, the IRS does not elicit a care provider. But the preparation of tax filings, in particular, has become increasingly complex over the years, which continues to direct many filers to third-party tax preparation agencies, such as accounting firms and tax preparation services. To fully comply with the requirements of the complex IRS Code, many taxpayers have extended their trust to tax professionals to avoid the risk of making mistakes.
Taxpayers are equally concerned not only that their income tax preparations are filed correctly and legally, but also that the handling of filers' most sacred and valuable information is protected from theft, misuse, or misuse. Accordingly, the latest proposed changes to the IRS Code, published in the Federal Register on Income Tax India on December 8, 2005, have prompted consumer advocates and members of the U.S. Congress to challenge such changes to IRS Code Section 7216-3. But the proposed changes were made public not only to the public but to members of Congress, just three weeks before a public hearing on the new rules was held at the IRS office on April 4, 2006.
Unfortunately, the deadline to allow public comments for the hearing ended on March 8, 2006, and the proposed changes were discovered by consumer advocacy groups, not lawmakers. Disturbing is the way the proposed changes have been drafted, and part of an overhaul of the Code, which has not been revised since 1974, is arguably sneaky. The redrafting is said to be an attempt to modernize the Code with rules related to the advent of e-commerce transport and technology since the 1970s.
The new language will require all taxpayers using third-party tax preparation services to sign documents specifically to sell tax information data to external marketers, database brokers, or financial institutions. In addition, documents need to be signed to allow such U.S. tax preparers to offshore such tax work, for example exclusively to India. But the interpretation of the actual language in the new proposed code, including the risk of taxpayers unknowingly signing such documents without realizing their impact, has raised doubts. The concern is whether taxpayers will be properly warned about what they are actually signing when they are overwhelmed with a slew of documents to execute.
According to IRS Commissioner Mark Everson, the proposed changes actually improve the protection of taxpayer information and are “not significant.” But upon closer examination, they increase the chances of identity theft and fraud not only across the US but globally in India, where preventing security breaches is largely reliant on a code of honor rather than being mandated by law. Therefore, a US tax return that is more detailed and detailed than any other personal financial document is ripe for picking.
While the IRS' proposed code changes are based on the use of electronic transmissions and new software technologies in the tax filing system, sales information and offshore tax preparation are not directly related to the tax filing mechanism. The IRS also argues that the 1974 Code, or our current tax code, already allows tax filers to profit from the sale of tax client information. But that information refers only to the tax filer's “affiliated” company. With the new changes, tax preparers will be allowed to sell tax information to any third party, affiliated or not.
However, there is a “warning” on the third party consent form, which clearly states: “Once your tax return information is disclosed to a third party with your consent, we have no control over how that third party handles your taxes if the third party Use or disclosure of your tax return information for a purpose other than the purpose for which you authorized the disclosure, we are not responsible for subsequent use or disclosure under federal tax law, and federal tax law may not protect you from that disclosure.”
Therefore, once initial consent is obtained, any third party may sell such information to any other third-party business without disclosure to the taxpayer and without any liability to the taxpayer or the IRS. Allegedly, the duration of the said consent will be limited to one year. However, without proper accountability mechanisms, non-enforcement of the term will continue.
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