Tax preparers working on returns for registered domestic partners must be careful to avoid compliance issues with the IRS, namely a conflict of interest. Learn more about how preparing taxes for both parties in an RDP could lead to problems in this guide.

Preparing the separate federal returns of both parties involves inherent conflicts of interest.  In addition, when representing both taxpayers, conversations or other communications between either party and the preparer is not considered confidential and is available to the other party. The RDPs must consent to the sharing of tax return information needed to complete and file both parties’ returns.  A recommended engagement letter dealing with these issues is included at the end of this chapter.

Preparing the tax returns of registered domestic partners includes some unique complications. For CA purposes, the partners must file as married individuals but for federal purposes the partners must file as unmarried individuals. Under federal law, Registered Domestic Partners are not recognized as being married, and so Registered Domestic Partners would be considered “third parties” with respect to disclosure rules. Sec 7216 of the Internal Revenue Code bars disclosure of tax return information to third parties without informed consent. Thus for federal tax purposes disclosing the tax information of one partner to the other partner is technically a violation of Sec 7216 even though the IRS asks for the name and Social Security number of the other partner on allocation Form 8958.

It is unlikely that the IRS would initiate any Sec 7216 sanctions against a practitioner since IRS instructions say to include the allocation form that includes the name and SSN of the RDP along with the allocated income, etc., items, and disregards the provisions of Section 7216.The potential risk of not having a disclosure consent is a disgruntled client with an aggressive attorney in a civil suit against the practitioner. A recommended consent form is included at the end of this guide.