Page 2 - Be Aware of 26 U.S.C. § 7216: You May, to Your Surprise, Be a Tax Return Preparer

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Fall 2018, Vol. 19 No. 1

[a] person is engaged in the business of preparing tax returns . . . if, in the
course of the person’s business, the person holds himself out to tax return
preparers or taxpayers as a person who prepares tax returns or assists in
preparing tax returns, whether or not tax return preparation is the person’s
sole business activity and whether or not the person charges a fee for tax
return preparation services.

26 C.F.R. § 301.7216-1(b)(2)(ii) (emphasis added).

Thus, you are a tax return preparer subject to sections 7216 and 6713 if you (1) hold
yourself out to a taxpayer client, and/or to an accountant with whom you work, as a person
who will assist in preparing the client’s tax returns, even if that is only a small part of your
business, or (2) are compensated for assisting in preparing a tax return for a client.

What Is Disclosure or Use of Tax Return Information?
Any attorney who works with clients who have potential criminal tax problems, and/or
who are under investigation by the Internal Revenue Service (IRS) or the Department of
Justice, will almost surely assist in preparing a tax return for the client and/or use tax
return information in making arguments in the client’s defense.

For example, if a client who is not yet under investigation determines to make a voluntary
disclosure of tax misconduct under Internal Revenue Manual9.5.11.9 (Dec. 2, 2009) in order
to avoid prosecution (not a voluntary disclosure of a foreign bank account under the
Offshore Voluntary Disclosure Program program as that program ended on September 28,
2018), you will be involved in assisting and directing the accountant who prepares the
client’s delinquent or amended tax returns, and you will likely draft riders to the returns as
necessary.

In addition, the IRS Streamlined Domestic Offshore Program and Streamlined Foreign
Offshore Program for nonwillful taxpayers with undeclared foreign accounts are still in
place to ensure against prosecution, and they require delinquent or amended returns,
riders, and a certification of nonwillfulness. As those taxpayers’ attorney, you will surely
direct and assist in the preparation of their delinquent or amended returns.

Similarly, if a client who is under criminal tax investigation engages in negotiations with
the government, you will likely use tax return information in those negotiations. If the
client determines to plead guilty, an inevitable provision of the guilty plea will be filing

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