How Far-Reaching is IRC 7216

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By Alex Vuchnich, CPA, CFE -

The more I talk with practitioners about IRC 7216 the more I wonder how far reaching the ramifications will be. I spoke with one practitioner who made the point that something as a simple as the third party newsletters many firms use to keep in touch with clients throughout the year could be a source of exposure to IRC 7216. If you are using address information obtained in connection with the preparation of the tax return, then under IRC 7216 this would be tax return information. If you wish to use the address information to send a newsletter or mailer to a client that you have sourced through a third party, you would then need to obtain the client's consent first! I can't imagine that this was the intent of this legislation but this is a case where the code has been written so broadly that all kinds of unexpected consequences are likely to snowball from it. To add to this is the additional confusion surrounding overall compliance. Another practitioner I spoke with mentioned the fact that the above issue may be circumvented if the firm received the information as part of a separate engagement, such as in performing the financial statement audit. However, in that case the information would have to have been procured prior to the tax prep engagement. So if the organizer came back before the audit then once again you are having to obtain client consent. I guess only time and a few court cases will tell exactly what the practical impact of IRC 7216 will be.

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