IRC § 7216 Questions and Answers Related to the Affordable Care Act
Internal Revenue Code § 7216 is a criminal provision enacted by the U.S. Congress in 1971 that, except as provided in regulations, prohibits tax return preparers from knowingly or recklessly disclosing tax return information or using tax return information for a purpose other than preparing, or assisting in preparing, an income tax return. This provision applies to tax return preparers who also offer services and education related to the Affordable Care Act. Violators are subject to a $1,000 fine or a year in prison, or both.
The regulations under § 7216, which are found at Treas. Reg. §§ 301.7216-1 to 301.7216-3, were substantially revised in 2008. On Jan.4, 2010, proposed and temporary regulations were published that described three circumstances when tax return information may be disclosed or used without taxpayer consent. These regulations were issued as final regulations effective on Dec. 28, 2012.
In addition to criminal penalties, a civil penalty of $250 for each unauthorized disclosure or use of tax return information by a tax return preparer is imposed by § 6713. The total amount imposed on any person under § 6713 shall not exceed $10,000 in any calendar year. For purposes of these questions and answers, which relate to the Affordable Care Act, the requirements and restrictions under § 7216 also apply under § 6713.
For more information on the general requirements of IRC § 7216, visit our Section 7216 Information Center.
Q1. How does IRC § 7216 affect tax return preparers?
A. The IRS takes the privacy rights of America's taxpayers very seriously and is committed to protecting those rights. Section 7216 prohibits tax return preparers, including those who also offer services and education related to the Affordable Care Act, from knowingly or recklessly disclosing or using tax return information for unauthorized purposes.
The tax return information a tax return preparer can disclose or use depends on whether the preparer obtains consent from the taxpayer, or whether Treas. Reg. § 301.7216-2 provides an exception to the general prohibition on disclosure or use of tax return information without taxpayer consent.
Q2. For tax return preparers, will taxpayer consent be required to use contact information to provide clients general educational information about the Affordable Care Act and health insurance available through the new health insurance marketplaces?
A. No. The § 7216 regulations permit tax return preparers to use a list of client names, addresses, email addresses, phone numbers and each client’s income tax form number to provide clients general educational information, including general educational information related to the Affordable Care Act. For example, a tax return preparer may mail general educational information to all clients regarding health care enrollment options available through the new health insurance marketplaces without obtaining consent.
Q3. Will taxpayer consent be required to solicit and facilitate client enrollment in health insurance available through the new health insurance marketplaces?
A. Yes. Tax return preparers who use tax return information to solicit and facilitate health care enrollment services must first obtain taxpayer consent to do so.
Example: Return Preparer Z is also a health care "navigator" who would like to use tax return information, as defined in Treas. Reg. § 301.7216-1(b)(3), to solicit and facilitate enrollment of eligible clients into qualified health plans available through the new health insurance marketplaces. Z must obtain taxpayer consent following the rules specified in Treasury Regulation § 301.7216-3 prior to using the tax return information in assisting taxpayers in connection with the solicitation and facilitation of the enrollment of Z’s eligible clients into qualified health care plans. See Rev. Proc. 2013-14 (I.R.B. 2013-3, Jan.4, 2013), as modified by Rev. Proc. 2013-19 (I.R.B. 2013-10, March 4, 2013), for requirements for consents from taxpayers who file a return in the Form 1040 series.
For information regarding the qualification requirements for health care navigators, agents, or brokers visit healthcare.gov.
Q4. Do consent requirements also apply to volunteer tax return preparers who offer client services related to the Affordable Care Act?
A. Yes. Solicitation to offer health care enrollment services by all tax return preparers, including volunteer preparers, using tax return information, requires taxpayer consent.
Q5. Is specific language required in § 7216 consent?
A. For calendar year 2013, tax return preparers may use either the mandatory language in section 4.04 of Rev. Proc. 2008-35 or the mandatory language in section 5.04 of Rev. Proc. 2013-14 for consents under § 7216 from taxpayers filing a return in the Form 1040 series. Starting Jan.1, 2014, tax return preparers must use the mandatory language in Rev. Proc. 2013-14. See Rev. Proc. 2013-19.