U.S. Rep. Jim Renacci (R-OH) has proposed enhanced taxpayer data security with the March 21 introduction of a bill that would prohibit the unauthorized use or disclosure of confidential taxpayer information by third parties without first obtaining written authorization.
Under current federal law, taxpayer consent is required to disclose confidential tax return information. However, once a taxpayer releases personal tax information to a third party, the recipient may use that information for purposes other than what was initially granted by the taxpayer, according to Rep. Renacci’s staff. Third parties typically share such tax information with affiliates, publish it, or even sell it, according to the Internal Revenue Service’s (IRS) National Taxpayer Advocate.
Rep. Renacci’s Protecting Taxpayer Confidentiality Through Safeguards Act, H.R. 5376, would close that loophole by amending the Internal Revenue Code of 1986 to ensure that contractors to whom return information is disclosed comply with confidentiality safeguards, according to text of the bill in the congressional record.
If enacted, H.R. 5376 would enhance confidentiality requirements by stipulating that sensitive information could be used only for the initial purpose that access was granted, according to a summary from the congressman’s office, and third parties would be required to secure written taxpayer consent to disclose such information to any other parties.
Situations such as mortgage applications require third-party access to a person’s tax returns so confidentiality and disclosure protections such as those provided under H.R. 5376 would ensure such access wasn’t abused, according to a March 30 statement from Rep. Renacci’s staff.
H.R. 5376 has been referred to the U.S. House Ways and Means Committee, which is also considering another bill the congressman introduced on March 21, the Creating An Online Platform for Instant 1099 Submissions Act, H.R. 5377. Rep. Renacci serves on the U.S. House Ways and Means Subcommittee on Tax Policy.
H.R. 5377 would allow the IRS to cross-reference Form 1099 data with individual return data in real-time. The bill aims to help the IRS identify and prevent fraud and identity theft while offering businesses more convenience and security in submitting the form. U.S. Reps. Mike Bishop (R-MI) and Diane Black (R-TN) are original cosponsors of the proposed bill.
“As a CPA, removing the chance of error is vital. We have to give the IRS the tools it needs to keep up with the times,” said Rep. Renacci in introducing H.R. 5377.