What is Section 7216?
Short answer
Section 7216 makes it a crime for a tax return preparer to knowingly or recklessly disclose or use tax return information beyond preparing the return without consent.
What it is
Section 7216 protects "tax return information": everything a preparer receives or produces to prepare a return, from a W-2 to the preparer's notes. Disclosing it, or using it for another purpose, is allowed only under the exceptions in the Treasury regulations or with a consent that meets the IRS format in Revenue Procedure 2013-14: written, specific, signed before the disclosure, and limited in time.
The regulations do allow disclosures needed to prepare the return, including to contractors and service providers who do work on the return, as long as the preparer tells them in writing that the rules apply to them. A separate civil penalty applies under section 6713.
Why it matters for a tax firm
Sending a client's documents to an outside tool to summarize, translate or categorize them is a disclosure. Whether it is permitted depends on the tool's role and the paperwork. Many firms discover they have been disclosing for years with no notice or consent on file.
How XyloDocs handles it
XyloDocs reads documents with private, self-hosted models rather than a public AI service, and firms can see which systems a document touched. The consent language a firm needs is still the firm's decision.
Related terms
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Sources
Questions about Section 7216
Is pasting a client's W-2 into a chatbot a Section 7216 disclosure?
Sending tax return information to a third party is a disclosure. Whether it falls under an exception depends on the provider's role and your agreement with it. Treat it as one until counsel says otherwise.
What must a Section 7216 consent contain?
The IRS format: who is disclosing, to whom, what information, for what purpose, how long the consent lasts, the required warning language, and the taxpayer's signature and date, obtained before the disclosure.
What is the penalty?
Section 7216 is a misdemeanor with a fine and up to a year in prison per violation. Section 6713 adds a civil penalty for each unauthorized disclosure or use.
Last reviewed: October 16, 2026. This glossary explains terms; it is not legal or tax advice. Check the cited source for the current rule.
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