IRC 7216 Consent Requirements: What Every Accountant Needs to Know

What Is IRC Section 7216?

IRC Section 7216 imposes criminal penalties on tax return preparers who disclose or use tax return information for purposes other than preparing the return — unless they have written consent from the taxpayer.

This matters to every accounting firm that uses cloud software. If you store client W-2s, 1099s, or any tax documents in Dropbox, Google Drive, a client portal, or any third-party service, you are technically "disclosing" that data to a third party.

Who Does This Apply To?

Any tax return preparer — CPAs, EAs, tax attorneys, and anyone who prepares tax returns for compensation. This includes bookkeepers who prepare returns as part of their services.

What Consent Is Required?

Under Revenue Procedure 2008-35, the written consent must include:

The name of the tax return preparer (your firm)

The name of the recipient (the software company — e.g., Veniara, Dropbox, TaxDome)

A description of the tax return information being disclosed

The purpose of the disclosure (secure storage, communication, etc.)

The date of the consent

A statement that the consent can be revoked

What Are the Penalties?

Willful unauthorized disclosure is a criminal offense under IRC 7216. Penalties include:

Fines up to $1,000 per disclosure

Up to 1 year imprisonment

These are per-violation — one firm with 100 clients could face significant exposure

How to Comply

Create a consent form that includes all six required elements listed above

Have clients sign it before you upload their data to any third-party service

Keep the signed forms on file for at least 3 years after the return is filed

Update annually or when you change service providers

What About Client Portals?

If you use a client portal like Veniara to exchange documents, messages, and invoices with clients, the portal company is a third-party recipient of tax return information. You need 7216 consent.

The good news: a single consent form can cover all the services the portal provides (file storage, messaging, e-signatures, invoicing) as long as the form describes them.

We provide a free 7216 consent template that covers client portal usage. Download it, customize it for your firm, and have it reviewed by your attorney.

Bottom Line

IRC 7216 consent is not optional. It's a criminal statute. The good news is that compliance is straightforward — one form per client, signed once, covers your use of cloud software for their tax data. Don't skip it.