Handling Client Information – The Do’s & Don’ts
When running a business, there are few things more important than taking care of your clients. Think fast – what does this look like to you/your company? A few that come to mind for us are… providing great customer service, listening/being proactive based on their needs & ensuring that you & your clients create a level of trust that both parties work to maintain.
You have gotten to where you are today because you have put your clients first – there is no doubt about that. And because of this, you inevitably developed a level of trust with customers that keeps them coming back to you each tax season. Now comes the most difficult part… doing business in a way that allows you to continue building trust between you & your clients. As a tax preparer this means practicing ethically & gaining consent from your clients every step of the way.
In this article, we will touch on the do’s & don’ts of handling client information & why gaining/documenting client consent is so important. Our goal is that you leave with a better understanding of the regulations put in place by the IRS & feel set-up for success as we head into TY21.
Staying up to date on tax law is imperative. Why? When it comes to handling client information, tax law has incredibly strict limitations on how/what information can be used. In 2008, the IRS modified section 7216 – this notes the specific regulations tax preparers must follow when disclosing/using client tax return information. Click here for more information on these modifications & the potential fines/penalties that could result from breaking tax law.
Client Information Regulations
Below you will find a list of important regulations to keep in mind when managing your tax practice & communicating with clients/sharing their information. For additional information on the do’s & don’ts, we recommend looking at this article.
- Pull distribution lists that only contain… client names, emails, phone numbers, mailing addresses, entity classification & income tax form number.
- Information on these lists can only be used in the following ways…
- For tax preparer to educate client regarding tax/business information.
- Selling additional tax return prep services to current client.
- Emails –
- Sending emails for the above purposes to clients is acceptable, so long as you are not attempting to sell non-tax return prep services.
- As a tax preparer, you may also share client information with a 3rd party service, so long as the content sent out only discusses tax/business information. Note – these emails/direct mail/etc. must only be sent with the purpose of educating clients &/or gaining additional tax return business from current clientele.
The Importance of Consent
When it comes to gaining consent from taxpayers, it is important to follow the tax law regulation guidelines below…
- As a tax preparer, you must gain consent from your client before using their information for any purpose that is not noted above.
- For consent to be legitimate, you must have your client put this in writing & sign/date it.
- In addition, you are required to disclose exactly what information you will be using & what you will be using it for.
- Looking to recommend additional services to your client? To do this, you must receive consent from your client before a tax return is prepared & finalized. Otherwise, consent will become null & void.
- There are other requirements to the consent you obtain as well, provided by the IRS. Be sure to follow them all.
Additional Sources for Further Education
Below we have added a few more sources for you to read through, to ensure that you are as educated on this topic as possible. Happy reading!
- The Confidentiality of a Client’s Tax Return Information by the CPA Journal
- Disclosure & Use of Tax Information Fact Sheet by the IRS
- Section 7216 FAQs Answered by the IRS
- Safeguarding Confidential Client Information by the Tax Adviser
- For “complete authoritative information” (per the IRS), refer to Treasury Regulations Treas. Reg. §301.7216 & Revenue Procedures 2013-14 & 2013-19
Information provided herein is general in nature, may not apply to your practice’s circumstance(s) & should not be construed as legal advice. Please refer to the IRS or consult your attorney for guidance. TaxAct does not warrant or guarantee the accuracy, reliability & completeness of the content of this site, which is provided “as is.”