Understanding the nuances of Internal Revenue Code (IRC) Section 7216 is imperative for tax and accounting firms.
Jump to:
- Q: What is Form 7216? And why does it matter?
- Q: When is it necessary to obtain client consent under IRC Section 7216?
- Q: What should be included in a valid consent form under IRC Section 7216?
- Q: Can 7216 consent be obtained electronically or is a physical signature required?
- Q: How long is 7216 consent valid?
- Q: What are the consequences of non-compliance with IRC Section 7216?
- Q: Are there any exceptions to obtaining client consent with Form 7216?
- Q: Can client consent be revoked?
- Q: How can accounting software assist in ensuring compliance with 7216 consent?
- Q: How can tax and accounting firms stay updated on changes to IRC Section 7216?
Do tax professionals at your firm fully grasp the consent to disclosure of tax return information? Form 7216 is at the center of this discussion as firms continually work to safeguard client confidentiality and maintain trust. What is 7216 consent? We answer this and other top Section 7216 frequently asked questions below.
Q: What is Form 7216? And why does it matter?
A: IRC Section 7216 governs the disclosure and use of taxpayer information by tax return preparers. For accounting firms, compliance with this section is critical because it establishes the rules surrounding client consent and confidentiality, ensuring ethical and legal practices. Form 7216 must be signed by taxpayers to provide consent to disclosure for tax return preparers.
Q: When is it necessary to obtain client consent under IRC Section 7216?
A: Client consent is required before tax return preparers can disclose or use client information for purposes other than tax return preparation. This includes scenarios like data sharing with affiliates, marketing efforts, and other non-tax-related activities.
Q: What should be included in a valid consent form under IRC Section 7216?
A: A comprehensive 7216 consent form must clearly outline the specific information to be disclosed, the purpose of disclosure, and the duration for which the consent is valid. Ensuring the language in the form is clear and concise is essential for compliance.
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).
Q: Can 7216 consent be obtained electronically or is a physical signature required?
A: Yes, electronic consent is permissible under IRC Section 7216 as long as the taxpayer is provided with sufficient information to make an informed decision and provide consent. Electronic methods (e.g., e-signatures) can streamline the consent process on Form 7216 for both clients and firms.
Q: How long is 7216 consent valid?
A: Generally, 7216 consent is effective for one year from the date the form is signed. 7216 consent may also be valid longer or shorter if a time frame is specified on the form. However, for ongoing services, it’s advisable to periodically revisit and renew consent to ensure compliance with changing circumstances and client preferences.
Q: What are the consequences of non-compliance with IRC Section 7216?
A: Non-compliance can lead to severe penalties, including fines and potential imprisonment. Strict adherence to the regulations outlined in IRC Section 7216 is paramount to protect both clients and the reputation of accounting firms.
Q: Are there any exceptions to obtaining client consent with Form 7216?
A: Yes, there are limited exceptions, such as disclosures required by law or court order. It’s critical for tax professionals to understand these exceptions so they can navigate the intricate landscape of client confidentiality within the bounds of the law.
Q: Can client consent be revoked?
A: Yes, clients have the right to revoke consent at any time. Firms should have clear procedures in place to promptly honor revocations and cease any unauthorized use or disclosure of client information.
Q: How can accounting software assist in ensuring compliance with 7216 consent?
A: Advanced accounting software can automate the consent management process, making it easier for firms to efficiently track, renew, and manage client consents. The use of technology can promote and deliver compliance excellence.
Q: How can tax and accounting firms stay updated on changes to IRC Section 7216?
A: Staying informed is key. Firms should regularly consult trusted sources, attend relevant training, and follow updates from regulatory bodies to ensure continued compliance with any amendments or revisions to IRC Section 7216.
Want to see if SurePrep is right for your firm? It only takes a few minutes to find out.
Take Fit AssessmentDisclaimer: The information contained within this document is provided for informational purposes only and is not intended to and must not be taken as a substitute for obtaining accounting, tax, legal, or other professional advice from a tax professional (e.g., an Enrolled Agent, CPA, attorney, etc.). No warranty or representation, express or implied, is made by SurePrep, part of Thomson Reuters, nor does SurePrep, part of Thomson Reuters, accept any liability with respect to the information and data set forth herein. Distribution hereof does not constitute legal, tax, accounting, investment, or other professional advice. You should consult a professional advisor and/or legal counsel prior to acting on the information set forth herein.