Norquist Seeks Guidance Expanding Preparers' Use of Taxpayer Info

February 11, 2020

The Honorable David Kautter
Assistant Secretary for Tax Policy
United States Department of the Treasury
1500 Pennsylvania Avenue, NW
Washington, D.C. 20220

Dear Assistant Secretary Kautter:

I urge you to reform guidance of Section 7216 of the tax code by allowing tax preparers to use certain tax return data from previous years when advising clients. This will help tens of millions of taxpayers better comply with the law by receiving specific, tailored tax information from their tax preparers.

IRC Section 7216 guidance provides rules governing disclosure and use of taxpayer information by tax preparers. However, this law and related guidance is outdated — it has not been updated in ten years and has not kept pace with technology innovations and consumer expectations.

Today, this law is hindering the ability of tax preparers to provide timely and relevant information to taxpayers. For instance, while lawyers and CPAs are permitted to advise a taxpayer on how tax law changes may affect previously filed returns and future returns, non-lawyers and non-CPA preparers can only use tax return information to discuss how tax law changes may impact a previously filed return.

This prohibition on prior year taxpayer information creates limitations on how these tax preparers can help their clients. For instance, it has impaired the ability of tax preparers to advise their clients following passage of the 2017 Tax Cuts and Jobs Act. The TCJA lowered individual tax rates, increased the standard deduction and child tax credit, created the 20 percent small business deduction, and modified many other credits and deductions. However, tax preparers were often unable to provide proactive and specific information on these many tax changes.

As the administration looks to highlight the success of the TCJA and propose a second tax cut, updating Sec. 7216 guidance will ensure tax preparers are able to provide needed information to taxpayers.

This will also disproportionately help lower- and middle-income taxpayers. According to IRS data, over 81 million tax returns were filed by a paid preparer including 64 million returns with AGI of $100,000 or less and 45 million with AGI of $50,000 or less.

An updated Sec. 7216 guidance could be relatively modest in scope. The IRS could issue a revenue procedure allowing tax preparers to provide clients information based on common tax return information such as adjusted gross income, filing status, number of credits taken, retirement income, child tax credit, and depreciation and amortization taken.

With Tax Day 2020 underway, the IRS should prioritize an update to Section 7216 guidance allowing tax preparers to use client tax return information to provide information that is beneficial for considering in light of future tax obligations. This will help thousands of tax preparers and millions of taxpayers better comply with the tax code and adapt to changes in tax law or changes to a taxpayer's financial situation.

Onward,

Grover G. Norquist
President, Americans for Tax Reform
Washington, DC