Page 4 - 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

Note that information obtained from clients not in connection with tax return preparation
services—even information that may at some point be used to assist in preparing a tax
return—is not deemed tax return information until it is used in connection with the
preparation of a tax return.

Exceptions to Use and Disclosure Prohibitions
Although 26 U.S.C. § 7216 and its regulations are set up as a blanket prohibition on use and
disclosure of tax return information, 26 C.F.R. § 301.7216-2 sets forth a great many
exceptions to this general rule. Uses and disclosures under 26 C.F.R. § 301.7216-2 do not
require a taxpayer client’s consent, while all other uses and disclosures require the
taxpayer’s written consent. 26 C.F.R. § 301.7216-3. A discussion of all of the myriad
exceptions under 26 C.F.R. § 301.7216-2 is beyond the scope of this article, which will
discuss those exceptions most relevant to an attorney who falls within the definition of a
tax return preparer under 26 C.F.R. § 301.7216-1.

The following uses and disclosures are permitted without obtaining your taxpayer client’s
consent. Some are directly connected with the business of preparing tax returns, and some
are merely related to that business. Some are self-evident; others require some
explanation.

• “Disclosure pursuant to other provisions of the Internal Revenue Code.” 26 C.F.R. §
301.7216-2(a).
• Disclosure to an officer or employee of the IRS. 26 C.F.R. § 301.7216-2(b).
• Disclosure pursuant to an order of a court or other legal compulsion. 26 C.F.R. § 301.7216-
2(g).
• Disclosure to or use by others in your firm who will also assist in preparing the client’s tax
return(s). 26 C.F.R. § 301.7216-2(c)(2).
• Disclosure to other tax return preparers outside your firm. 26 C.F.R. § 301.7216-2(d).
o This disclosure is only for the purpose of having them prepare or assist in preparing
tax returns, butnotin order for them to make substantive determinations—analysis,
interpretation, or application of the law—that affect the tax liability reported by the
taxpayer.
o Consequently, if you are the first recipient of your taxpayer client’s tax return
information and you are going to engage an accountant to prepare tax returns for
the client and that accountant will make substantive determinations in connection
with those returns, you will need the client’s written consent to disclose the tax
return information to the accountant.

© 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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