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Are You Getting the Proper Tax Return Release Consent from Clients?

January 25, 2019

A recent court ruling, Strawn v. Morris, Polich & Purdy, LLP, details the pitfalls some tax and accounting professionals can fall into if they do not follow proper legal processes. This court case addressed whether Federal and state tax returns are privileged from discovery under California law. Unless authorized by law, tax and accounting professionals cannot disclose clients’ tax return information to third parties for purposes other than those related to the preparation and filing of a clients tax return without a client’s consent. This case involved suspected arsonist Dennis Strawn (the case was dismissed) and his insurance company, State Farm. State Farm had denied his insurance claim from the fire. During the dispute, the law firm representing State Farm had received and shared Mr. Strawn’s tax returns with State Farm. Mr. Strawn responded by suing various parties for privacy breach, including the State Farm law firm. Mr. Strawn’s accounting firm “mistakenly provided the returns along with the other financial information.” Mr. Strawn had never authorized the accountant to share his tax returns.

Many tax and accounting professionals sometimes get loose with their own internal controls and processes. A misstep as detailed in this court case, can create quite the legal mess and, more importantly, potential monetary liability. There are various situations where a tax and accounting professional may be asked to share tax returns with outside third parties. This request may come from the client or the third party themselves.

Here are some common requests:

  • Mortgage company
  • Other Tax Professionals
  • Financial Services
  • Individual Retirement Accounts (IRA)
  • Spousal Disclosures

It is crucial that tax and accounting professionals have processes, engagement letters and consent disclosures that cover the most common types of requests. There is nothing worse than finding out a staff member made a mistake that leaves your firm in the middle of big-time litigation. We find this so important that we include six different consent disclosures in our CountingWorksPro marketing platform to make it easy to get an eSigned consent form from clients.

If you have any questions or would like to learn more about eSign consent disclosures, how to ramp up your marketing, or how to start improving your online presence, contact us today at 1-800-442-2477 x3 or set up some time to speak with one of our digital marketing experts.

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Lee Reams II

I am a marketing junkie who has spent the last 20 years developing and executing "best in class" word-of-mouth marketing campaigns. With over 10,000 happy clients I think we are on to something. The explosion in web marketing and social media have redefined the way independent professionals market their practices. Follow my blog to see if you can take some of our actionable ideas to market your own practice.

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