Page 2 - The Confidentiality of a Client's Tax Return Information: Provisions Tax Preparers Must Remember

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minations that affect a taxpayer’s tax lia- services may, unless the taxpayer directs subpoena, or similar requirement, or to
bility. A substantive determination otherwise, do the following: report the commission of a crime
involves “an analysis, interpretation, or n Disclose or use tax return information n Disclosure to contractors in connec-
application of the law.” Basically, this in the ordinary course of rendering those tion with the programming, mainte-
means that disclosure is permitted to an other services nance, or procurement of equipment
outside service that simply fills out and n Make the information available to the used in return preparation
files tax returns, such as an e-file taxpayer’s attorney, accountant, or n Disclosure to an attorney in order to
provider [Treasury Regulations section investment adviser. [Treasury obtain legal advice, or in connection with
301.7216-2(d)]. Regulations section 301-7216-2(i)]. Treasury investigations or court proceedings
The regulations are stringent regarding Again, it is not clear how a taxpayer n Disclosure to an individual taxpayer’s
the sharing of information with tax return would know to direct otherwise. fiduciary, such as the executor of the tax-
preparers outside of the United States. A The regulations are strict about a tax payer’s estate
tax return preparer may not send any tax return preparer’s disclosure or use of tax n Disclosure or use in an audit under the
return information outside the United return information for marketing purpos- law of any state or local tax authority
States without the client’s prior con- es. A tax return preparer may use and n Disclosure or use, if necessary, for a
sent—period. Conversely, a U.S. tax maintain a list of client contact informa- tax return preparer to collect payment for
return preparer may use or disclose tax tion for limited marketing purposes, but tax preparation services
return information gained from a tax there are various requirements for and n Disclosure or use to conduct quality, peer,
return preparer outside the United States limitations on this use. The main restric- or conflict reviews, but disclosure is per-
only if the taxpayer initially furnished the tion is that the list may be used only to mitted only to the reviewer and the preparer
information to the non-U.S. tax return provide tax return advice or offer addi- [Treasury Regulations sections 301.7216-
preparer, the U.S. tax return preparer is tional tax return preparation services to 2(a), (d), (f), (g), (j), (l), (p), and (q)].
a member of a U.S. branch of the non- the client, and not to offer other services Significantly, certain disclosures or
U.S. tax return preparer’s firm, and the or products [Treasury Regulations sec- uses are permitted only by CPAs or
disclosure or use is made to assist in the tion 301.7216-2(n)]. attorneys—not by other kinds of prepar-
preparation of tax returns [Treasury In addition, a tax return preparer may ers. Consistent with applicable legal and
Regulations section 301.7216-2(c)(3)]. maintain a statistical compilation of tax ethical responsibilities, CPAs may use
Disclosures and uses may also be made return information related to internal taxpayers’ information, and may disclose
of information concerning certain related management or in support of his tax it to another employee or member of
taxpayers—such as family members, return preparation business, or for bona their firm, in order to provide other
trusts and estates (and their beneficiaries fide research or public policy discussions. accounting services to the taxpayer. For
and fiduciaries), partnerships and partners, This statistical compilation may also be example, a CPA may do the following:
and corporations and shareholders—but used in marketing and advertising so n Use a taxpayer’s tax return informa-
only if the first taxpayer’s tax interest in long as it— tion in connection with preparing books
the information is not adverse to the sec- n is anonymous, and records, working papers, or account-
ond taxpayer’s tax interest in that infor- n does not disclose aggregate data from ing statements for the taxpayer
mation, and the first taxpayer has not fewer than 10 taxpayers, and n Within the normal course of rendering
expressly prohibited the disclosure or use. n is not false or misleading. accounting services, make the taxpayer’s
(It is unclear how the first taxpayer would A tax return preparer cannot, however, tax return information available to third
know about the potential disclosure in use any statistical compilations that iden- parties, including stockholders, manage-
order to prohibit it, since the regulations tify dollar amounts or percentages relat- ment, suppliers, or lenders, unless the
do not require the preparer to discuss this ing to dollar amounts, such as amounts taxpayer directs otherwise [Treasury
issue with the taxpayer.) Information dis- of refunds obtained for clients [Treasury Regulations section 301.7216(h)(1)].
closed to the second taxpayer may only Regulations section 301.7216-2(o)]. Once more, it is unclear how the tax-
be in the form in which it appeared on The following disclosures and uses payer would know to direct otherwise,
the first taxpayer’s return [Treasury are also permissible without a taxpay- since the regulation does not require the
Regulations section 301.7216-2(e)]. er’s consent: CPA to give the taxpayer warning of
A corporate fiduciary, such as a trust n Disclosure pursuant to other provisions these disclosures and uses.
company, that prepares a tax return for of the IRC, or to an officer or employee Finally, a CPA, consistent with appli-
a client to whom it also renders fiduciary, of the IRS cable legal and ethical considerations,
investment, custodial, or management n Disclosure pursuant to a court order, may also take taxpayer information into

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