Taxes Blog

Finance Blogs » Taxes Blog » Protecting taxpayer confidentiality

Protecting taxpayer confidentiality

By Kay Bell · Bankrate.com
Tuesday, October 4, 2016
Posted: 2 pm ET
Protecting taxpayer confidentiality

Lawyers are held to higher standards than CPAs. Above, actor Bob Odenkirk, who stars as Saul Goodman in Better Call Saul, promised confidentiality to his client Walter White in Breaking Bad. Amanda Edwards/Getty Images

Fans of television's favorite ethically challenged criminal lawyer Saul Goodman know that despite his many questionable actions, he definitely respects attorney-client privilege. He told Breaking Bad's meth-making kingpin Walter White upon their first encounter, "Put a dollar in my pocket" to become a client and ensure that anything said between the two remained confidential.

Does the same apply to accountants? The question came up after the New York Times talked with Donald Trump's apparently chatty former tax accountant.

Follow the (tax) code

Technically, accountants do not have the same legal constrictions, or protections depending on your point of view, as lawyers when it comes to client privacy.

But the Internal Revenue Code specifically says it is illegal to disclose a taxpayer's information without that filer's consent.

Section 7216 of the code says that as a general rule, any person who is "in the business of preparing, or providing services in connection with the preparation of, returns of the tax" is prohibited from "knowingly or recklessly" disclosing "any information furnished to him for, or in connection with, the preparation of any such return."

RATE SEARCH: Looking for a high-yielding savings account? Compare rates at Bankrate.com today!

Costly penalties for violations

That code section then notes that if a tax professional uses such taxpayer information "for any purpose other than to prepare, or assist in preparing, any such return," that person has committed a federal misdemeanor and could, upon conviction, be fined as much as $1,000 or a receive a jail term of up to 1 year or both, plus court costs.

In addition to the criminal sanctions for improper disclosure of a person's tax info cited in Section 7216, the U.S. Code also covers civil treatment of such releases in section 6713.

Under this section, improper use of tax info could bring a penalty of $250 for each such disclosure, with a maximum penalty per year of $10,000.

Specific CPA guidance

The American Institute of Certified Public Accountants, or AICPA, is the primary member association for the accounting profession. As such, it sets ethical standards for its members.

When asked about its member CPAs' nondisclosure responsibilities to clients, the AICPA cites the U.S. code sections that address this issue.

The AICPA also has established its own ethical standards for the profession.

Its code of professional conduct specifically states that "a member in public practice shall not disclose any confidential client information without the specific consent of the client."

Keep your mouth shut

Of course, such a stance does not, notes the AICPA, affect in any way an accountant's obligation to comply with a validly issued and enforceable subpoena or applicable laws and government regulations.

But basically, when you share your tax information with an accountant and it's all above board, you should expect that information to remain between just you and your accountant.

Or, as Amit Chandel, a CPA in Brea, California, told me: "We may not have attorney client privilege, but we have ethical standards to uphold and a fiduciary duty to keep our mouth shut most off the time."

Are you comfortable sharing your tax details with your tax pro? Would you consider switching your tax preparation tasks to an attorney to get tighter client confidentiality coverage?

You can get an overview of tax laws at Bankrate's Tax Center, where you also will find federal and state tax news, filing tips and calculators.

ADVISER SEARCH: Need help with your personal finances? Find a financial planner in your area at Bankrate.com today!

«
»
Bankrate wants to hear from you and encourages comments. We ask that you stay on topic, respect other people's opinions, and avoid profanity, offensive statements, and illegal content. Please keep in mind that we reserve the right to (but are not obligated to) edit or delete your comments. Please avoid posting private or confidential information, and also keep in mind that anything you post may be disclosed, published, transmitted or reused.

By submitting a post, you agree to be bound by Bankrate's terms of use. Please refer to Bankrate's privacy policy for more information regarding Bankrate's privacy practices.
2 Comments
S kuriakose
October 15, 2016 at 1:05 pm

Rich man like Donald Trump can manipulate and avoid paying tax & poor me,has to pay tax,Which IRS cut money from my social security. Is it fair?

David Woods, EA
October 09, 2016 at 7:30 pm

The comments about confidentiality and privilege are off base somewhat.

With regards to federal tax matters, the only difference between an attorney and accountant in terms of privilege is with criminal tax matters. An attorney will still have privilege with respect to criminal matters while an accountant will not. Regarding non-criminal tax matters, accountants do indeed have privilege. It should also be noted that where the preparation of a tax return is concerned, neither attorneys nor accountants have privilege. This privilege is found at IRC 7525.

It also needs to pointed out that both accountants and attorneys are subject to IRC 6713 and 7216, and there is no difference in confidentiality.

Add a comment

(Comments may take 5-10 minutes to appear)