IRC 7216 consent rules when outsourcing tax returns

The default under 301.7216-3(a)(1) is that a preparer may not disclose or use a taxpayer’s return information before obtaining written consent, and the consent must be knowing and voluntary. The exceptions are in 301.7216-2.

For outsourcing, the key exception is 301.7216-2(d)(1): disclosure to another preparer located in the United States for preparation or auxiliary services, where the second preparer does not make substantive determinations. Disclosure to a preparer outside the United States, or for substantive determinations, needs consent first.

Under 301.7216-3(a)(3)(i), a consent names the preparer and the taxpayer and is signed and dated by the taxpayer. Paragraph (b)(1) is titled “No retroactive consent”, so collect it during onboarding, not after the work has started.

Rev. Proc. 2013-14 sets the format. Section 5.01 requires each disclosure to be covered by consent on a separate written document, though section 5.05 allows multiple disclosures in one form. Every consent must say that if no duration is specified, it is valid for one year from the date of signature. Paper consents must be in at least 12-point type (section 5.02).

Where the return information may go to a preparer outside the United States and the SSN is masked, section 5.04(1)(e)(i) of Rev. Proc. 2013-14 requires a statement that the consent may result in the information being disclosed to a preparer located outside the United States. A longer statement applies if the SSN is not fully masked.