Obtaining client consent is imperative for the use of taxpayer information. Drafting an effective Section 7216 consent letter plays an integral role during annual tax preparation.
In the tax and accounting industry, clarity and compliance are paramount. One critical aspect is the Section 7216 consent letter. This seemingly routine document holds importance in safeguarding client privacy, meeting legal requirements, and fostering trust. Let’s delve into why understanding and properly implementing this letter is a must for both tax professionals and their clients.
Educating clients on the purpose of the letter
The Section 7216 consent letter serves as a shield, protecting client privacy while ensuring compliance with the law. It’s imperative to explain to clients the significance of this document. From safeguarding sensitive information to outlining their rights regarding consent and options for revocation, clear communication is key. Clients should understand why their consent is necessary and how it impacts the handling of their data.
Which information should be included?
When crafting a 7216 consent form, clarity is non-negotiable. Clearly explain the purpose of disclosure, specify to whom the information will be disclosed, and establish the duration of consent. A signature serves as confirmation of understanding and agreement. Each detail should be explicit, leaving no room for misinterpretation. You may even want to draft a set of Form 7216 instructions with your clients.
The text in your Section 7216 consent letter must pertain solely to the purpose of disclosure and include the following language: You are not required to complete this form. Because our ability to disclose your tax return information to another tax return preparer affects the tax return preparation service(s) that we provide to you and its (their) cost, we may decline to provide you with tax return preparation services or change the terms (including the cost) of the tax return preparation services that we provide to you if you do not sign this form. If you agree to the disclosure of your tax return information, your consent is valid for the amount of time that you specify. If you do not specify the duration of your consent, your consent is valid for one year from the date of signature. [Revenue Procedure 2013-14, section 5.04(1)(b).]
What you should NOT do when developing your Section 7216 consent letter
Avoid industry jargon and ambiguous language that could be unclear to clients. The letter should be easily accessible and understandable to clients of varying backgrounds. Complicating the language or making the letter challenging to navigate only creates barriers. Clarity should be the guiding principle throughout the form’s development.
Best practices for 7216 form implementation
Standardizing your 7216 text is one of the most effective ways to simplify your firm’s efforts and ensure a consistent client experience. That means creating templates for your 7216 forms. By using templates, you can save time for admins and reduce the potential for errors.
Need more details? The American Institute of CPAs (AICPA) and Chartered Institute of Management Accountants (CIMA) offers free Section 7216 guidance and multiple sample consent forms (subscription required).
Considering 7216 consent another opportunity for delivering excellent client service
The 7216 consent process shouldn’t be viewed as a mere administrative task but as an opportunity for meaningful client engagement. Encourage open dialogue between staff and clients, stressing the importance of transparency and compliance. Engaged clients are more likely to understand the process and contribute positively to firm operations.
Section 7216 consent letters aren’t just another checkbox in the tax process—they’re a critical component of compliance and client trust. Crafting an effective letter, coupled with clear communication and proper implementation, streamlines the consent process and enhances client satisfaction. By prioritizing clarity and compliance, tax professionals can navigate this aspect of their practice with confidence, ultimately benefiting both their firm and their clients.