Considerations for Tax Return Preparers Outsourcing Overseas

Obtaining Taxpayer Consent Under IRC Section 7216 and Related Authorities

Caroline Rule, JD

As early as 2006, the IRS has recognized that “foreign outsourcing is not prohibited by … final regulations, which permit disclosure of tax return information outside of the United States if the taxpayer consents to such disclosure” (Notice of Proposed Rulemaking, Reg-137243-02). In more recent years, a growing number of U.S. tax return preparers have routinely begun outsourcing tax return preparation overseas. These tax return preparers must always obtain a client's consent to overseas disclosure and comply with data safeguard requirements under IRC section 7216, its Treasury Regulations, and related authorities—and refrain from outsourcing if a client balks at consenting, no matter how cost-effective it may be.