CONFIDENTIALITY OF TAX RETURN INFORMATION

Confidentiality of tax return information. We are often asked by clients about the information that they provide us, and whether it is confidential. Let us provide you with some of the IRS guidelines for Tax Professionals that discuss the measures needed to safeguard a person’s tax return and other tax related information. Internal Revenue Code section 7216 governs when a tax return preparer may disclose or use a taxpayer’s tax return information without first obtaining the taxpayer’s consent. Because it is a federal crime to violate section 7216 and its regulations, Circular 230 governs the rules tax practitioners must follow. IRS section 7216 and its regulations are set up as a blanket prohibition on a preparer’s disclosure or use of a taxpayer’s return information without the taxpayer’s prior consent. Treasury Regulations Section 301-7216-2, however, provides for numerous exceptions to this rule. Confidentiality of tax return information.

For disclosures or uses not permitted thereunder, IRC section 7216 makes it a crime for a tax return preparer to knowingly or recklessly, disclose any information furnished to the tax return preparer in connection with preparing a client’s tax return, or use tax return information other than to prepare or assist in preparing a client’s tax return. Section 7216 broadly defines a tax return preparer as any person who is engaged in the business of preparing or assisting in preparing tax returns, who is employed by such person, or who provides auxiliary services in connection with the preparation of tax returns, such as an e-file provider.

Tax return information is “any information, including, but not limited to, a taxpayer’s name, address, or identifying number, that is furnished in any form or manner for, or in connection with, the preparation of a tax return. Tax return information includes, information that the taxpayer furnishes to a tax return preparer, information furnished to the tax return preparer by a third party and information that the tax return preparer derives from tax return information.