By Steven B. Gorin, Esq. Thompson Coburn LLP, St. Louis, MO
Internal Revenue Code §7216 generally penalizes tax preparers who disclose or use tax return information without express, specific permission from the taxpayer. Regulations were finalized in 2008 and effective as of January 1, 2009. If a planner receives information for reasons other than tax preparation and the information is later used on a tax return, then the information becomes privileged tax return information.
The IRS is primarily concerned with tax return preparers using the information to cross-sell other services. However, generally lawyers may use tax return information in the course of a traditional legal practice and accountants may use such information in the course of a traditional accounting practice. Regs. §301.7216-2(h)(1)(i). Special rules apply for disclosure to persons who are not in the United States. Regs. §301.7216-2(c), (d). If you are directly or indirectly involved in tax return preparation, you should consider getting to know these rules.
For more information, in the Tax Management Portfolios, see Tarr and Drucker, 634 T.M., Civil Tax Penalties, and in Tax Practice Series, see ¶3830, Penalties.
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