Protecting taxpayer confidentiality
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By Bankrate
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.”
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?
Paul S. Herman CPA, a tax expert for individuals and businesses, is the founder of Herman & Company, CPA’s PC in White Plains, New York. He provides guidance and strategies to improve clients’ financial well-being.