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Accountants beware – The importance of obtaining client consent prior to disclosing tax information

7/10/25

By: Scott Eric Anderson and James G. Bozza

Internal Revenue Code § 7216 is a criminal provision that prohibits tax return preparers from knowingly or recklessly disclosing their clients’ tax return information for a purpose other than completing an income tax return. Under 26 CFR § 301.7216-1, the penalty for providing tax return information is up to one year in prison, a fine of not more than $1,000, or both, as well as the costs of prosecution. These steep penalties are intended to preserve the privacy and confidentiality of client information and to prevent unauthorized or improper use.  

Importantly, the criminal factor of this provision may lead some professionals to believe that an element of malicious intent is needed for the government to impose a penalty. But this is not the case – all that is required is for the tax return preparer to know that they released client tax return information to someone other than the taxpayer. An example is when tax information is requested by third parties in lawsuits such as probate contests, divorces (business and marital), when issues arise involving IRS or Department of Labor investigations or even when trusted financial players like national banks state their need for the information.     

Another common misconception is that the exclusion in the provision for responding to court orders also applies to subpoenas. A subpoena is not a Court Order. Responding to a subpoena with client tax information requires client consent. A grand jury subpoena, however, is an exception to the written authorization requirement. 

Section 7216 consent forms negate the possibility of criminal penalties. When seeking consent, the form must clearly explain the purpose, scope and duration of the disclosure, as well as the identity of the persons and/or entities seeking the information. It also must inform the client that they maintain the right to revoke their consent at any time and explain the consequences that may result from them doing so.  

Navigating the disclosure of client tax information can be a difficult event for professionals. The FMG professional liability team is prepared to assist with each unique situation. Contact FMG attorneys Scott Anderson and James Bozza for more information at scott.anderson@fmglaw.com and james.bozza@fmglaw.com.  

Information conveyed herein should not be construed as legal advice or represent any specific or binding policy or procedure of any organization. Information provided is for educational purposes only. These materials are written in a general format and not intended to be advice applicable to any specific circumstance. Legal opinions may vary when based on subtle factual distinctions. All rights reserved. No part of this presentation may be reproduced, published or posted without the written permission of Freeman Mathis & Gary, LLP.