Under Section 7216 of the Internal Revenue Code, a paid tax return preparer commits a federal crime if they disclose or use the information you gave them for any purpose beyond preparing your return, unless a narrow exception applies or you sign a consent form that meets strict federal requirements. The Section 7216 tax preparer disclosure rules carry criminal penalties of up to $1,000 and one year in prison, plus separate civil penalties that can reach $50,000 a year when the misuse is tied to identity theft.1Office of the Law Revision Counsel. 26 USC 7216 – Disclosure or Use of Information by Preparers of Returns
Who and What the Rule Covers
Section 7216 applies to anyone “engaged in the business of preparing, or providing services in connection with the preparation of” income tax returns, and to anyone who prepares a return for compensation.1Office of the Law Revision Counsel. 26 USC 7216 – Disclosure or Use of Information by Preparers of Returns That reaches beyond the CPA or enrolled agent who signs your return. It also covers employees doing data entry, staff at tax preparation franchises, and companies that develop or host tax preparation software. If a person or firm touches your data as part of the preparation chain, they are bound by these rules.
The protected data is defined just as broadly. “Tax return information” is any information you furnish, or that the preparer obtains, in connection with preparing your return. W-2s, 1099s, Social Security numbers, bank account details, names of dependents, investment gains, business income — all of it qualifies. Even statistical summaries a firm builds from client data remain protected, whether or not any individual taxpayer can be identified in the numbers.
What a Preparer Cannot Do Without Your Consent
The statute’s default rule is a flat prohibition: knowingly or recklessly disclosing your tax return information, or using it for any purpose beyond preparing the return it was given for, is a criminal misdemeanor.1Office of the Law Revision Counsel. 26 USC 7216 – Disclosure or Use of Information by Preparers of Returns
The most common violations involve repurposing client data for non-tax business. Using your income information to pitch insurance, investment advisory services, or mortgage refinancing without a compliant consent is prohibited. So is selling or sharing a client list with an outside marketing company or unrelated vendor, or disclosing the details of a specific client’s finances to any third party for non-tax purposes.
There is a practical line between tax-related and non-tax uses. Using your income data to advise you on estimated tax payments is a permissible tax-related use that needs no separate consent. Using the same data to market a wealth product or personal loan does not qualify, and it requires a full, valid consent.
What a Preparer Can Do Without Your Consent
The Treasury Regulations recognize a limited set of situations where disclosure or use is allowed without you signing anything.2Office of the Law Revision Counsel. 26 USC 7216 – Disclosure or Use of Information by Preparers of Returns – Section: Exceptions
- Sharing your information with another employee at the same firm to help prepare your return.
- Responding to a valid court order, subpoena, or request from the IRS or a state tax authority.
- Using your data for internal quality or peer reviews tied to return preparation.
- Contacting you the following year to solicit your tax preparation business, using only your name, address, email, and the type of return you filed.3eCFR. 26 CFR 301.7216-2 – Permissible Disclosures or Uses Without Consent of the Taxpayer
- Disclosing your information to a related taxpayer such as a spouse, parent, or business partner, if that person’s tax interests are not adverse to yours and you have not specifically prohibited it.3eCFR. 26 CFR 301.7216-2 – Permissible Disclosures or Uses Without Consent of the Taxpayer
Everything outside these exceptions requires consent that meets the format, content, and timing rules described below.
What a Valid Consent Form Must Look Like
The regulations treat consent as a precisely engineered document. Miss a required element and the consent is invalid, which turns every disclosure made under it into a violation. Knowing what a compliant form looks like is the easiest way to spot one that isn’t.
Format and Content
The consent must be a standalone document, separate from your engagement letter or any other agreement. It has to identify the specific tax return information being disclosed or used, the purpose, and who will receive the information. For anyone filing a return in the Form 1040 series, the text must be printed in at least 12-point type.
A single form may authorize multiple disclosures, or multiple uses, but it cannot combine both categories. A form that authorizes a disclosure to a third party and a separate internal use of the same data on one page is defective.
Required Warnings on Form 1040 Consents
Every consent tied to a Form 1040 filer has to include specific federally mandated statements. For a consent to disclose your information to a third party outside the tax preparation context, the form must tell you:
- Federal law requires the consent, and the preparer cannot disclose your information without it.
- Once disclosed, federal law may not protect your information from further use or distribution by the recipient.
- You are not required to sign the form to receive tax preparation services.
- Consent obtained by conditioning tax preparation services on your signing is not valid.4Internal Revenue Service. Form and Content of a Consent to Disclose or a Consent to Use Form 1040 Tax Return Information
Every consent form, whether for disclosure or use, must also give you contact information for the Treasury Inspector General for Tax Administration so you know where to report problems: 1-800-366-4484 or complaints@tigta.treas.gov.4Internal Revenue Service. Form and Content of a Consent to Disclose or a Consent to Use Form 1040 Tax Return Information
One narrow exception to the anti-conditioning rule: if the disclosure sends your data to another preparer as part of preparing your return, the preparer may decline service or change pricing based on your refusal to consent, and the mandatory language on that form reflects the distinction.4Internal Revenue Service. Form and Content of a Consent to Disclose or a Consent to Use Form 1040 Tax Return Information
Timing and Duration
Consent has to be signed and dated before any disclosure or use occurs. Retroactive consent is never valid. Electronic consent needs a signature process that verifies your affirmative agreement to each specific item authorized.
If a consent form does not state how long it lasts, it expires one year from the date you signed. You can set a longer or shorter window. A preparer also cannot ask you to consent to solicit non-tax business after handing you the finished return to sign. The sequence matters.
The Offshore Boundary
If your return information is going to a preparer or service provider outside the United States, your consent is always required, even where an exception would otherwise cover the same disclosure inside the country. And even with your consent, your Social Security number cannot be included in the information sent overseas. This is one of the few areas where signing a form does not clear the whole disclosure.
Penalties When a Preparer Breaks the Rules
Violations run on two tracks that can apply to the same conduct at the same time.
Criminal
A preparer who knowingly or recklessly discloses or misuses your return information commits a misdemeanor. The maximum punishment is a fine of up to $1,000, imprisonment for up to one year, or both, plus prosecution costs.5eCFR. 26 CFR 301.7216-1 – Penalty for Disclosure or Use of Tax Return Information by Preparers of Returns Because the standard is “knowingly or recklessly,” the government has to show more than an honest mistake.
Civil
Section 6713 imposes civil penalties that do not require proof of intent. The standard penalty is $250 per unauthorized disclosure or use, capped at $10,000 per calendar year.6Office of the Law Revision Counsel. 26 USC 6713 – Disclosure or Use of Information by Preparers of Returns
When the misuse is connected to identity theft, the amounts climb. The per-violation penalty rises to $1,000 and the annual cap to $50,000. These enhanced penalties are tracked separately from the standard ones, so a preparer could face up to $10,000 in standard civil penalties plus up to $50,000 in identity-theft-related civil penalties in the same year.6Office of the Law Revision Counsel. 26 USC 6713 – Disclosure or Use of Information by Preparers of Returns
Professional Discipline and Private Lawsuits
The IRS Office of Professional Responsibility can pursue action against CPAs, enrolled agents, and other practitioners subject to Treasury Circular 230. Sanctions include censure, suspension, or disbarment from practice before the IRS. OPR can also impose monetary penalties on the individual practitioner and on the employer if the employer knew or reasonably should have known about the conduct.7Internal Revenue Service. Guidance to Practitioners Regarding Professional Obligations Under Treasury Circular No. 230 Taxpayers can also bring civil suits for damages caused by an unauthorized disclosure.
How to Report a Preparer Who Misused Your Information
You have more than one place to file a complaint. The right one depends on what happened.
Complaint to the IRS
For preparer misconduct, including unauthorized disclosure of your return information, file IRS Form 14157 (Complaint: Tax Return Preparer) with Form 14157-A (Tax Return Preparer Fraud or Misconduct Affidavit). You can submit online, fax to 855-889-7957, or mail to the IRS Return Preparer Office in Atlanta.8Internal Revenue Service. Make a Complaint About a Tax Return Preparer If you already received an IRS notice or letter about the preparer’s actions, send the forms to the address on that notice instead.
Report to TIGTA
The Treasury Inspector General for Tax Administration is the independent watchdog for IRS-related misconduct, and it is the channel every Section 7216 consent form is required to name. You can reach TIGTA at 1-800-366-4484 or complaints@tigta.treas.gov.4Internal Revenue Service. Form and Content of a Consent to Disclose or a Consent to Use Form 1040 Tax Return Information
If Identity Theft Is Involved
When the misuse leads to identity theft, such as a fraudulent return filed in your name, start at IdentityTheft.gov. The site walks you through the process and electronically submits IRS Form 14039 (Identity Theft Affidavit) for you. The IRS typically sends a confirmation letter within about 30 days.9Federal Trade Commission. Report Tax Identity Theft With IdentityTheft.gov If the fraudulent filing blocked you from e-filing your own return, you will still need to file by mail and pay any taxes owed separately.