IRS Issues Regulation Clarifying Its Privacy Policy For Sub-Contractors

by Mike Godfrey, for LawAndTax-News.com, Washington

14 January 2005

The US Treasury Department and the Internal Revenue Service on Wednesday unveiled a proposed regulation designed to clarify the restrictions that apply to confidential tax return information that the IRS releases to contractors and, in turn, subcontractors, performing tax administration services.

The Internal Revenue Code protects the privacy of return information, but permits disclosure for tax administration purposes to IRS employees and IRS contractors. Under the Code, an IRS contractor may see return information if access to the information is necessary to process returns, program equipment, or perform other contractual services.

The proposed regulation clarifies that subcontractors must comply with the same strict protocols as contractors in handling return information, and states that subcontractors, like contractors, are subject to civil and criminal penalties for improper disclosure.

In a statement, the IRS confirmed that:

"While contractors have long been used to perform specific services for Federal agencies, including the IRS, today's proposed regulation clarifies that IRS privacy protections apply to all contractors and subcontractors."

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