Washington – IRS Commissioner Mark Everson told House lawmakers Wednesday that proposed changes to privacy rules governing tax preparers who handle taxpayers’ personal information would simplify and tighten the standards.
But the proposal alarmed some consumer groups that fear the changes could open taxpayers to more disclosures or sale of personal information.
The Internal Revenue Service said the recommended alterations force companies to tell consumers more about how they use information if the taxpayer consents to its disclosure.
The tax collectors also said that the proposal grants tax preparers only one new power: the ability to advertise financial products sold by other companies to their tax clients if those clients consent.
Everson told Rep. Joseph Knollenberg, R-Mich., chairman of the House Appropriations subcommittee that oversees the IRS budget, that the uproar is “a classic Washington case.”
On one side, Everson said, consumer groups do not want companies to market financial products to people getting their tax returns prepared. On the other side, he said, are companies opposed to increased disclosure rules. They’re “standing by silently and saying nothing in hopes that the regulation will be killed,” Everson said.
The IRS wants to make changes to regulations, laid down in 1974, requiring that tax preparers get consent from a taxpayer to use or disclose information provided on a tax return.
The tax collectors say the old rules need to be updated now that many tax returns are prepared electronically.
The regulations say a tax preparer can disclose tax return information to a third party if the taxpayer gives consent. They also say a tax preparer can market other financial products to clients if those products are from an affiliated group, such as a bank or lender within the same holding company.
The IRS wants to drop the requirement that companies must be affiliated for tax preparers to market other financial products to their clients.
Several consumer groups say that change eliminates a restriction on outside companies getting hold of taxpayers’ personal data for marketing purposes. But the IRS says the regulation has always allowed outside companies to use tax return information if the taxpayer consents.
The proposed regulations would give taxpayers more detail about the information that can be disclosed and how it could be used.
The consent would allow use of that information for one year, not indefinitely.
