IRS updates sec. 7216 guidance on disclosing tax return information.

• Author: Goldstein, Benson S.

THE IRS TOOK ADDITIONAL STEPS TO PROtect taxpayer information with the December release of T.D. 9608, which contains final regulations under Sec. 7216. This Code section addresses the disclosure or use of tax return information by tax return preparers who prepare tax returns for compensation. Also in December, the IRS released Rev. Proc. 2013-14, which provides guidance to tax return preparers about the format and content of taxpayer consents for purposes of Sec. 7216.

Sec. 7216 forbids paid tax return preparers to "knowingly or recklessly" (1) disclose any information furnished to them for, or in connection with, the preparation of a tax return or (2) use such information for any purpose other than to prepare or assist in preparing such a return. A violation of Sec. 7216 could subject the tax return preparer to a misdemeanor criminal penalty (if convicted) of a fine of up to $1,000, or imprisonment for up to one year, or both, plus costs of prosecution.

In general, Regs. Sec. 301.7216-2 specifies a number of situations when a tax return preparer can disclose or use tax return information for a nontax purpose. Among other amendments, T.D. 9608 revises Regs. Sec. 301.7216-2(n), which governs lists for solicitation of tax return preparation business. The preamble to T.D. 9608 states that the IRS considers accounting services to be non-tax-preparation services. Therefore, according to the preamble, if a tax return preparer wants to use tax return information from a client's tax return to solicit or offer accounting services to the client, the preparer must obtain the taxpayer's written consent before soliciting the additional services. On the other hand, if the tax preparer is merely soliciting additional tax return preparation services, the preparer does not generally need to obtain the client's consent.

Newsletters are a major area covered under the final regulations. Under Regs. Sec. 301.7216-2(n), as amended, a tax return preparer may compile specified items of taxpayer clients' tax return information without their consent and contact those clients if the preparer is providing tax information and general business or economic information or analysis for educational purposes. The preamble states that "a newsletter that summarizes recent case law or describes current legal developments would be considered to be for educational or informational purposes," not needing the taxpayer's written consent.

While a commenter on previously proposed Sec...