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Completeness of Tax Information

Tax Services Solve Tax Problems. > Completeness of Tax Information

Failing to disclose information on your tax

You already know that your tax information is confidential and shouldn’t be shared with anyone else. 

No matter what kind of tax one is paying, the information related to the taxation files is confidential.  

So, when the disclosure of the tax information is necessary?

Under certain circumstances, an enrolled agent, a CPA, a tax lawyer, or a tax preparer will need the confidential information to proceed with your tax filings or any tax problems the taxpayer faces. Disclosures are essential in tax filings, IRS compliance, and penalties prevention. 

What is tax information disclosure? 

According to the Internal Revenue Code 7216, it is imminent for a tax preparer to seek the consent and approval of the taxpayer for using any of the confidential tax return information. Under circumstances where the tax preparer will need to use the tax details mentioned in your Federal, State, or City tax return file, consent must be signed by the disclosing parties. Form 8275 is used as the Disclosure Statement, where the individual or organization taxpayer provides the specific tax-related information to disclose to the IRS. Disclosure of the information must be done only upon voluntary consent from the taxpayer as per the laws set by the Internal Revenue Service authorities.

What happens if one fails to disclose all necessary tax information on tax returns?

Disclosing the tax return information by enrolled agents, CPAs, tax attorneys, and tax preparers to the IRS is essential in many instances. Failure to do so might put you in a tight spot. Such failed acts are considered to be done in bad faith, which is punishable according to the US Government laws. 

If a taxpayer does not disclose all the necessary information on his tax returns even after giving consent, he or she might face several consequences. Below are some of the implications one will have to encounter on failure to disclose information on your tax return. 

  1. Tax penalties: Often, due to failure to disclose correct tax information, your preparer might not be able to file the tax return for the current financial year by the due dates. Due to the delay, you will be charged a penalty based on the duration and the type of tax. 
  2. Tax evasion guilty: Without proper information disclosure, your preparer wouldn’t apply the correct tax approach. 
  3. If you are found presenting false documents to evade taxes, you will be guilty of falsification and tax evasion. 
  4. Judicial offense: If you are discovered submitting incomplete and incorrect information in your tax returns due to non-disclosure, you might face criminal charges.

Is tax disclosure necessary?

Yes, it is essential to disclose all information related to your tax filings. Here are some of the benefits of proper tax disclosures by tax preparers, enrolled agents, CPAs, and tax attorneys to the IRS. 

  1. Proper understanding of the tangible and intangible assets under the taxpayer’s ownership
  2. Helps to keep track of foreign accounts and assets through FATCA
  3. Adequate calculation of income and deductions. 
  4. Disclosures prevent harsh penalties that can be imposed on the taxpayer and the tax preparer. 
  5. Accurate tax information disclosure will help you ensure the correct filing of the IRS tax forms to the IRS, states, and the cities. 

Conclusion

Even though your tax information is confidential, proper disclosures to the IRS must be done in order to be compliant with tax laws. This is where the disclosure of specific tax information comes in the scenario. Some taxpayers think that using the disclosure tax form is a red flag for the IRS. If the disclosures are correctly done, I would consider this tax form to be more of a green light than any red flags can ever be. 

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