With many offices doing multiply services, Taxes, Insurance, Financial Products. What protection does the taxpayer have to the confidentially of his or her information.
Under the Internal Revenue Code (IRC) sec 6713, If any person who is engaged in the business of preparing, or providing services in connection with the preparation of a tax return. Must disclose any information furnished to him for, or in connection with, the preparation of any such return, or uses any such information for any purpose “other” than to prepare, or assist in preparing, any such return.
In a Nut shell, You have to disclose even before you prepare the tax return if any information might be used to sell or discuss other product or services that you provide. A common issue are prepares that also sell IRA’s. You would have to let the taxpayer know that you are using the information they provide for the tax return to sell them an IRA.
Not to say that this is bad tax planning, But the IRS has determine that without discloser to the taxpayer that their information is being used is creating conflicts between preparer and taxpayer. Also even if your main business is not preparing taxes but a side service you have to disclose. That would also mean that even a mailing to clients of other services would also have to be disclosed.
The fine for not disclosing this information starts at $250.00 for each offensive. Most professional preparers (EA, CPA’s and Attorney’s) offer an engagement letter before service is started and that would also be the time to bring out your disclosure letter if the discussion of other services or product should arise.
Also most engagement letter also spell out confidentiality of personal records. When a taxpayer walks away from your office, they should feel safe in the knowledge that their personal information is secure and safe. Kerry Freeman, EA and NTPI Fellow. Mr. Freeman comes from a second generation tax office and now practices in Anthem, Arizona.
Mr. Freeman is a member of the National Association of Enrolled Agents (NAEA) and past president of the Central Arizona Chapter of Enrolled Agents (CACEA). Mr. Freeman write many articles in many of the Phoenix Newspapers and has been on local television with current tax updates.