The Truth About The Taxpayer First Act (“TFA”)
BEWARE OF "FAKE NEWS"!
Readers beware; there are hundreds of rules & regulations your credit union is constantly required to abide by – and it’s a full-time job! The many sources & resources you turn to are valuable – if they’re accurate. Do your fact-checking before you “Act.”
Nevermore so is the case with the recently enacted “Taxpayer First Act.” Among many elements of this Act is a not-so-subtle requirement that seemingly now requires permission from a taxpayer before you can pass along their tax return to another party. Digging deeper, however, the truth reveals itself as a “maybe” and “only in certain circumstances.” Here’s the deal:
The TFA has enacted a sort of “behind the scenes” as an interoffice/interagency regulation governing the who, what, when, where, & why of handling the precious tax returns in possession of the IRS. So, to be clear, this regulation is not really so much an outwardly facing regulation that others must comply with/be concerned about. For you (a FI/Credit Union), the most important element comes into play only when (and if) and only if you request an individual’s tax return directly from the IRS. If you otherwise receive a return, be careful what you do with it, but you needn’t issue a disclosure and receive consent simply because you requested it and/or received it. That’s the word as things are today.
In those instances when it’s true that you have the need to deal directly with the IRS to receive a return, it is also true that you now need to get positive consent from the taxpayer before you “Act.” That would include a very specific consent form that you’ll need to provide to your taxpayer member for them to sign and return. Without the taxpayer’s consent, it’s inadvisable to go forward with a request directly from the IRS, as you’ll be violating the spirit and the explicit requirements of the regulation, carrying with that violation some very serious consequences. So, even if it’s a “deal-breaker” for a loan, etc., don’t get in contact with the IRS without the taxpayer’s consent, period. Kinda makes sense if you think about it.
Beware of “fake news” out there, though, that might imply that you now need to get consent from a taxpayer in all cases, as this is not the reality of the Act as it is today. Nor is the case that you need to retroactively comply, as it would be entirely overburdensome to flesh out all instances of tax returns received, notify the taxpayers of their rights, and then attempt to retroactively receive their consent.
Stay tuned as time goes by, too. On too many occasions we’ve seen an initial regulation such as the TFA expand into other regulations with other regulatory bodies. So don’t be too surprised if one thing leads to another and another rule is enacted requiring the prior consent for any time you forward on any tax return to another, in all cases. Today, though, the rules only apply when the request is made directly to the IRS from you.