Do You Need Client Consent to Use an Offshore Tax Preparer?

The rule in plain words

Section 7216 of the Internal Revenue Code controls how tax return preparers use and disclose their clients' tax return information. The IRS's own FAQ sets out the part that matters for outsourcing.

Disclosure to another preparer who is helping prepare the return does not need the taxpayer's consent, as long as that preparer is in the United States or a US territory or possession. If the other preparer is located outside the United States, the taxpayer must agree and sign a consent form before the information is disclosed.

What the consent must look like

The consent is a formal document, not a line buried in small print.

• It must use the specific language set out in Revenue Procedure 2013-14, section 5.04(e), for disclosures to preparers outside the US.
• It must be signed and dated by the taxpayer, in pen and ink or electronically.
• If it does not state an expiration period, it is effective for one year from the date the taxpayer signed it.
• Collect it before any information is shared, and keep a copy with the client file.

Social Security numbers

Social Security numbers get stricter treatment. The IRS says preparers may not obtain consents to disclose SSNs to preparers located outside the United States. SSNs can be disclosed only if both the US firm and the offshore preparer maintain adequate data protection safeguards, as defined in section 5.07 of Revenue Procedure 2013-14. In practice, firms either document those safeguards or set up the work so offshore staff never see full SSNs.

Penalties

The IRS FAQ lists both. Under Section 6713, the civil penalty is $250 per violation. Under Section 7216 itself, a knowing or reckless violation is a crime punishable by a fine of up to $1,000, up to one year in prison, or both, for each violation. With a full season of returns, per-violation penalties add up quickly.

How firms handle it in practice

The firms that do this smoothly treat consent as part of onboarding, not a scramble in March.

• Add the Section 7216 consent to your engagement package for every client whose return may go offshore.
• Track expiry dates, since a consent without a stated period lapses after a year.
• Keep the work inside your own systems where you can, so you control access and can remove it.
• Tell clients in your engagement letter that a third-party provider may help, as the AICPA Code expects, and keep a confidentiality agreement with the provider.
• Confirm that every person preparing returns for you holds a valid PTIN.