Page 6 - Be Aware of 26 U.S.C. § 7216: You May, to Your Surprise, Be a Tax Return Preparer

Disclosure or use in an audit of any tax return of a taxpayer under the law of any
state, or assisting a taxpayer client with foreign-country tax obligations. 26 C.F.R. §
301.7216 2(k).

Disclosure or use for conducting a conflict review, undertaken to comply with
requirements established by any federal, state, or local law, agency, board, or
commission or by a professional association ethics committee or board to identify,
evaluate, or monitor actual or potential legal and ethical conflicts of interest when a

tax return preparer is considering engaging a new client. 26 C.F.R. § 301.7216 2(p).

Tax return information gathered in conducting a conflict review may only be
used for purposes of that conflict review.

Disclosure or use to the extent necessary for a tax return preparer to collect payment
for tax preparation services. 26 C.F.R. § 301.7216 2(l).

This simply means that you can use a taxpayer client’s credit card and
disclose the information that appears on the card.

If use and/or disclosure is not authorized under 26 C.F.R. § 301.7216 2, as discussed above, it is
prohibited unless you obtain consent from the taxpayer on forms prepared according to very
specific, exacting requirements set forth in 26 U.S.C. § 301.7216 3. This regulation should be
reviewed carefully if you are requesting taxpayer consent. Consent may not be retroactive.

Conclusion

Being a criminal defense lawyer in the tax area may be much more complex than you
realized. If you represent a taxpayer client who is or may soon be under criminal investigation

by the IRS or the Department of Justice, you will almost inevitably become a tax return
preparer under 26 C.F.R. § 301.7216 1 by assisting in the preparation of tax returns. You must
then ascertain whether your use or disclosure of your taxpayer client’s tax return information
is permitted under 26 C.F.R. § 301.7216 2. If not, you must obtain your taxpayer client’s consent
to use or disclose on forms that comply with all of the requirements of 26 C.F.R. § 301.7216 3.

Caroline Rule is a partner at Kostelanetz & Fink, LLP, with offices in New York and Washington,
D.C.

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