Page 3 - 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

accurate amended tax returns, and you will be involved in the preparation of those returns,
including drafting any necessary riders.

These are only a few examples of the ways in which you may, by assisting in the
preparation of taxpayer clients’ tax returns, become a tax return preparer in the course of
your regular legal practice.

Tax Return Information and Its Use and Disclosure
The questions then become the following:

• What is tax return information?
• What constitutes use of that information?
• What constitutes disclosure of that information?

The term tax return information is expansive, meaning any information (including a
taxpayer’s name, address, and identifying number) that the taxpayer furnishes to a tax
return preparer or third party, or that a tax return preparer derives from other tax return
information that is in any way connected with the preparation of the taxpayer client’s tax
return(s). 26 C.F.R. 301.7216-1(b)(3)(i). Information is considered to have been furnished
“in connection with tax return preparation,” and is therefore tax return information, if the
taxpayer would not have furnished the information to the tax return preparer other than
for the tax return preparer to prepare or assist in preparing a tax return. 26 C.F.R.
301.7216-1(b)(3)(i)(D). Conversely, tax return information does not include information
that is identical to tax return information but that you obtained other than in connection
with the preparation of a tax return. 26 C.F.R. 301.7216-1(b)(3)(i)(C).

The definitions of disclosure of tax return information and use of tax return information are
equally broad. “The term disclosure means the act of making tax return information known
to any person in any manner whatever.” 26 C.F.R. 301.7216-1(b)(5) (emphasis in original).
For example, you would disclose tax return information if you provided a taxpayer client’s
tax documents to another employee of your firm who might be assisting in representing the
client. Similarly, “[u]se of tax return information includes any circumstance in which a tax
return preparer refers to, or relies upon, tax return information as the basis to take or
permit an action.” 26 C.F.R. 301.7216-1(b)(4)(i). For example, you would use tax return
information if you make a recommendation to a taxpayer client or offer a service to the
client based on knowledge you gained from the client’s tax return information. Cf. 26 C.F.R.
301.7216-1(b)(4)(ii).

© 2018 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be
copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent
of the American Bar Association.
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