Section 7216 Frequently Asked Questions
Internal Revenue Code Sec. 7216 is a criminal provision enacted by the U.S. Congress in 1971 that prohibits preparers of tax returns from knowingly or recklessly disclosing or using tax return information. A convicted preparer may be fined not more than $1,000, or imprisoned not more than one year or both, for each violation. The Secretary of Treasury is permitted to grant exceptions to this general prohibition by issuing regulations. Regs. Sec. 301.7216 had been substantially unchanged for over 30 years and did not address the modern return preparation marketplace, particularly electronic filing and the cross-marketing of financial and commercial products and services during the return preparation experience. Final Treasury Regulations on rules and consent requirements relating to the disclosure or use of tax return information by tax return preparers became effective Dec. 28, 2012.
Sec. 6713 imposes a civil penalty of $250 on any person who is engaged in the business of preparing, or providing services in connection with the preparation of returns of tax, or any person who for compensation prepares a return for another person, and who
- Discloses any information furnished to him or her for, or in connection with, the preparation of any such return, or
- Uses any such information for any purpose other than to prepare, or assist in preparing, any such return. Imposition of the penalty under Sec. 6713 does not require that the disclosure be knowing or reckless as it does under Sec. 7216.
The updated regulations clarify that e-file providers are considered tax return preparers and persons that perform auxiliary services for e-file providers in connection with tax return preparation are covered by the statute and regulations. The regulations also clarify that contractors receiving tax return information from tax return preparers are considered tax return preparers subject to the same provisions and penalties. Tax return preparers who engage contractors and disclose tax return information to them are required to inform contractors of the rules and consequences in a written notice.
To see the full list of Sec. 7216 FAQs, visit the IRS's website.
Sample Consent Forms
In all likelihood, the appropriate consent forms for one accounting firm may not necessarily be suitable for another firm. That is, each tax preparer is urged to read Regs. Sec. 301.7216 and Rev. Proc. 2013-14 very closely in order to draft the appropriate consent forms necessary to meet the unique facts and circumstances of his or her particular firm’s needs. Moreover, the provided consent forms reflect the personal views of the CPAs who developed the form, and thus, such forms do not represent a position of the AICPA or of the AICPA Tax Section.
Four examples of consent forms are provided as follows:
- Consent to Disclosure of Tax Return Information. This is a general consent to disclose tax return information which can be used for disclosure of the return information to (among others) your client’s banker or mortgage broker (see Consent A). [General]
- Consent to Disclosure of Tax Return Information. This consent form involves the disclosure of tax return information to a specific financial planning/investment firm (see Consent B). [Specific]
- Consent to [Foreign] Disclosure of Tax Return Information. This consent form permits a U.S. preparer to disclose tax return information (including the taxpayer’s Social Security number as long as adequate data protection safeguards are in place) to a foreign-based preparer (see Consent C).
- Consent to Use Tax Return Information. This consent form covers the use of the tax return information by the preparer to disseminate firm newsletters, press releases, webcasts, and hiring announcements to individual clients. This consent form should be used when the preparer plans on using an individual client’s tax return information for non-tax purposes (see Consent D).
View sample consent letters here.
In providing these consent forms, we must stress that they are: (1) merely examples; and (2) should not be viewed as “templates” or “authoritative.”
- Practitioners' Responsibilities in Complying With Records Requests, The Tax Adviser, Aug. 2014
- Current Tax Return Disclosure Issues Involving Sec. 7216, The Tax Adviser, Aug. 2013
- Disclosure Consent under Section 7216, Journal of Accountancy, Oct. 2009
- IRS Section 7216 Information Center, IRS webpage that contains additional guidance regarding Sec. 7216.