The Internal Revenue Service Dec. 30 issued a pair of revenue rulings to provide guidance on determining whether a tax return preparer is liable for criminal and civil penalties for use or disclosure of return information.
Revenue Rulings 2010-4 and 2010-5, issued along with a news release (IR-2009-121), came a day after IRS released proposed, temporary and final regulations (REG-131028-09, T.D. 9478) to update guidance on the disclosure and use of tax return information by return preparers under tax code Section 7216 (247 DTR G-4, 12/30/09).
Rev. Rul. 2010-4 addressed situations where the return preparer uses tax return information to contact taxpayers about tax law changes that could affect their income tax liabilities, which were reported in returns previously prepared or processed by the preparer.
The ruling covers circumstances where a preparer uses information from a tax return to determine which taxpayers' future income tax return filing obligations may be affected by a prospective change in tax rule or regulation, and to contact these taxpayers to inform them of the changed rule or regulation, explain how the modification may affect them, and advise them with respect to actions they may take in response to the change, IRS said.
‘Newsletter’ Guidance Welcomed
Rev. Rul. 2010-4 also addressed situations where a tax return preparer discloses tax return information contained in the list allowed to be maintained by the preparer to a third-party service provider that creates, distributes, or publishes "tax information and general business and economic information or analysis for educational purposes or for purposes of soliciting additional tax return preparation services for the tax return preparer, for the purpose of obtaining the ‘newsletter' creation, publication, and or distribution services offered by the third-party service provider,” IRS said.
Rev. Rul. 2010-4 concluded that tax return preparers are not liable for penalties under Sections 7216 and 6713 in any of the three situations.
Tom Ochsenschlager, vice president for tax at the American Institute of Certified Public Accountants, told BNA Dec. 30 that his organization had received a number of inquiries about the newsletter issue addressed in Rev. Rul. 2010-4. "So I think that was very good news,” he said.
The ruling makes it clear that a return preparer may notify a taxpayer when legislation may affect his or her tax liability through either the newsletter process or by picking up the phone, Ochsenschlager said. "That's very helpful to know that can be done” without advanced permission, he said.
Disclosures to Liability Insurers
Rev. Rul. 2010-5 addressed circumstances when a tax return preparer discloses tax return information:
required by a professional liability insurance carrier when obtaining or maintaining professional liability insurance coverage;
required by the insurance carrier when reporting a claim or a potential claim against the preparer, or to help in the investigation of such a claim against the preparer;
to a professional liability insurance carrier in order to obtain legal representation under the terms of the insurance policy or to an unrelated attorney for the purpose of evaluating a claim or potential claim against the preparer. Rev. Rul. 2010-5 concluded that a tax return preparer is not liable for penalties in any of these situations.
The revenue rulings are scheduled to be published Jan. 25 in Internal Revenue Bulletin 2010-4. Texts of Rev. Rul. 2010-4, Rev. Rul. 2010-5, and IR-2009-121 are in BNA TaxCore.