You have found the tax professionals your firm needs. The workflows are mapped. The technology is ready. 

Then someone asks: 

“What happens if our clients refuse to sign the Section 7216 consent form?” 

That question can stop an offshore tax initiative before it begins. 

The concern is understandable. Clients are being asked to approve the disclosure of sensitive tax information. Some may not recognize the form. Others may have questions about where their information is going, who will see it, and what protections are in place. 

CPA firms should not dismiss those questions. They should be ready to answer them clearly. 

The goal is not to push clients toward a signature. It is to help them make an informed decision while giving the firm a compliant and repeatable process. 

What is Section 7216 consent? 

Section 7216 consent is a taxpayer’s written authorization allowing a tax return preparer to disclose or use tax return information when the disclosure or use is not otherwise permitted by law. 

Internal Revenue Code Section 7216 prohibits tax return preparers from knowingly or recklessly disclosing or using tax return information for an unauthorized purpose. Treasury regulations contain exceptions for certain disclosures and uses that can occur without consent.

For taxpayers filing Form 1040-series returns, IRS Revenue Procedure 2013-14 provides requirements for the format and content of consent forms. It also addresses electronic consent and electronic signatures.

Section 7216 is broader than offshore tax preparation. It governs the disclosure and use of tax return information in several situations. Offshore preparation is one important application because the location of the person receiving the information can change the consent requirement.

Is offshore tax preparation legal? 

Yes. US tax return information can be disclosed to a preparer located outside the United States when the applicable Section 7216 requirements are followed. 

The regulations state that if a US-based preparer wants to disclose tax return information to an officer, employee, or member of the same firm located outside the United States or its territories and possessions, taxpayer consent is required before the disclosure.

That distinction matters. 

Suppose a CPA firm has one tax preparer in Texas and another member of the same firm in India. The fact that both individuals work for the same organization does not, by itself, remove the consent requirement. The regulations specifically address the recipient’s location.

By contrast, the regulations include permitted disclosures and uses for people in the same firm who are located within the United States and are assisting with return preparation or related services. Different rules and exceptions can apply to other arrangements, so each workflow should be reviewed on its own facts.

Why might clients hesitate to sign a Section 7216 consent form? 

There is no credible public study establishing the leading reasons clients refuse Section 7216 consent. There is also no verified industry-wide rejection rate. 

Firms should therefore avoid assuming that every refusal has the same cause. 

However, IRS guidance and professional resources show why the request can require a careful explanation. 

1. The client does not recognize the form 

Most clients do not work with Section 7216 every day. A consent form may arrive alongside an engagement letter, organizer, document request, and several other items. 

Without an introduction, the client may not know: 

• Why the firm is requesting consent 
• What information may be disclosed 
• Who may receive the information 
• Where the recipient is located 
• What the recipient will do 
• How long the consent will remain effective 

IRS Revenue Procedure 2013-14 acknowledges that taxpayers had expressed confusion about whether consent forms were necessary simply to engage a tax preparer. The IRS revised mandatory language to clarify the distinction between engaging a preparer for tax preparation and consenting to certain disclosures or uses of tax information.

The practical lesson is simple: do not send a legal document without explaining why the client has received it. 

2. The required warning raises serious questions 

The consent process is designed to help taxpayers understand what they are authorizing. A firm should not try to make the form sound insignificant. 

For disclosures outside the United States, the client may need to understand that the information will be received by a preparer in another country. Questions about access, privacy, and legal protection are reasonable. 

Professional guidance on client communication recommends explaining the purpose, scope, duration, recipients, benefits, and risks of the proposed use or disclosure.  

The firm should be prepared to answer: 

• Who will receive my information? 
• What information will they see? 
• Why do they need it? 
• In which country will the work be performed? 
• Will my CPA firm remain responsible for the engagement? 
• What happens if I do not sign? 

The answers must match the firm’s actual delivery process. 

3. The recipient’s role is unclear 

“Global delivery team” may make sense internally. It may tell a client very little. 

Clients need a concrete explanation of who will receive their information and why. 

For example: 

“We are requesting your permission to disclose specified tax information to [recipient name], located in [country]. The recipient will assist our firm with defined tax preparation tasks.” 

The firm should then explain what remains under its own control and review. Any statement about preparation, review, supervision, or final sign-off must accurately describe the firm’s process. 

4. The firm explains its capacity problem instead of the client’s experience 

A partner may view offshore tax preparation as a way to address hiring constraints or seasonal workload. Those are firm-level reasons. 

The client is more likely to ask what the arrangement means for their return. 

Compare these two explanations: 

Firm-centered explanation 

“We need additional offshore resources because we are short-staffed.” 

Client-centered explanation 

“A tax professional outside the United States will assist with specified preparation work. Our firm will continue to manage your engagement and remain your point of contact. The consent form explains what information may be shared and who may receive it.” 

The second version gives the client more useful information. It should only be used if it accurately reflects the firm’s arrangement.

5. The request arrives without warning 

The regulations require consent before a disclosure when consent is necessary.

Waiting until work is ready to move can turn the form into a last-minute administrative obstacle. It can also put client-facing staff under pressure to secure a quick response. 

A better practice is to introduce the delivery model early. This is an operational recommendation, not an IRS requirement. 

A firm might explain the arrangement during: 

1. The engagement conversation 
2. The onboarding process 
3. Delivery of the formal consent 
4. Follow-up with clients who have questions 

This gives clients time to understand the request before making a decision. 

How should CPA firms explain Section 7216 consent? 

Explain what is happening, why consent is being requested, who will receive the information, and what choice the client has. 

The compliant consent language must remain intact. A plain-English note can accompany it. 

Example client explanation 

Federal rules require us to obtain your permission before making the disclosure described in the attached form. The form identifies the information that may be disclosed, who may receive it, why it is needed, and how long your consent will remain effective. Please review it carefully and contact us with any questions before deciding. 

Keep the explanation factual 

A client explanation should cover four points: 

Who 

Name or identify the person or organization receiving the information as required by the applicable rules and consent. 

What 

Explain the tax return information covered by the request. 

Why 

Describe the work the recipient will perform or the specific purpose for which the information will be used. 

Where 

Clearly state when the recipient is located outside the United States. 

Avoid absolute statements such as: 

• “There is no risk.” 
• “Your data is completely safe.” 
• “Nothing changes.” 
• “Every CPA firm does this.” 
• “All clients approve it.” 

These claims are either impossible to guarantee or unsupported. 

How should CPA firms address data-security questions? 

A signature authorizes the disclosure described in the consent. It does not replace the firm’s responsibility to evaluate how information will be protected. 

For certain foreign disclosures involving Social Security numbers, IRS Revenue Procedure 2013-14 addresses adequate data-protection safeguards. Sample professional materials also distinguish foreign disclosure involving Social Security numbers and direct practitioners back to the applicable IRS requirements.

Before discussing security with clients, firm leaders should verify the provider’s actual controls. Questions may include: 

• How is access granted and removed? 
• Does each user have individual credentials? 
• Is multifactor authentication required? 
• Can users download or locally store client files? 
• How are devices managed? 
• How is system activity logged? 
• What happens to access when an engagement ends? 
• Which independent certifications or assurance reports are current? 
• Do reported controls cover the systems and locations involved in the engagement? 

These are recommended due-diligence questions. Section 7216 consent should not be presented as proof that the underlying security controls are adequate. 

What happens if a client refuses Section 7216 consent? 

If valid consent is required for a specific disclosure and the client does not provide it, the firm cannot proceed with that disclosure. 

For example, if a client declines consent for the disclosure of tax return information to a preparer located outside the United States, the firm should not route that client’s return through the proposed offshore workflow. 

The exact operational consequence depends on the firm’s model and whether another legally permitted route is available. 

Possible internal options may include: 

• Keeping the return with an authorized US-based team 
• Assigning it to a different workflow 
• Revising the engagement approach 
• Explaining any actual service implications to the client 

These are operational possibilities, not universal legal solutions. The firm should decide its process with legal or compliance advice before seeking consent. 

The wrong time to create a refusal process is after the first client says no. 

Can a CPA firm require a client to provide consent? 

Treasury Regulation §301.7216-3 generally states that consent must be knowing and voluntary. It also contains a specific provision under which a preparer may condition tax preparation services on consent to disclose information to another tax return preparer providing assistance with preparation or related auxiliary services.

Because the rule contains both a general principle and a specific exception, firms should not rely on a generic answer. 

The arrangement, recipient, purpose, taxpayer type, and consent language all matter. Firms should obtain qualified advice before making service conditional on consent. 

Common Section 7216 mistakes CPA firms should avoid 

Treating every disclosure the same

The regulations include several disclosures and uses that may occur without consent. Firms should first determine which rule applies to the specific workflow.

Using the wrong form or language 

For Form 1040-series taxpayers, Revenue Procedure 2013-14 provides specific format and content requirements. A generic authorization may not satisfy those requirements.

Asking after information has already been disclosed 

Where consent is required, it must be obtained before the disclosure.

Treating silence as approval 

The consent rules require taxpayer authorization in the prescribed form. A lack of objection should not be treated as signed consent. 

Hiding the offshore arrangement 

The purpose of the process is informed consent. Firms should describe the proposed disclosure accurately. 

Making unverified security promises 

A certification name is not a substitute for understanding its scope, period, exceptions, and relevance to the service being delivered. 

Leaving client-facing staff without answers 

Partners, managers, and administrators should use a consistent explanation and know when to escalate a legal, compliance, or security question. 

A practical Section 7216 readiness checklist for CPA firm leaders 

Before requesting client consent, confirm that your firm can answer the following: 

Compliance 

• Have we determined whether consent is required for this workflow? 
• Are there applicable exceptions? 
• Are we using the correct form for the taxpayer and disclosure? 
• Will consent be obtained before information is disclosed? 
• Does our electronic-signature process meet the applicable requirements? 

Client communication 

• Can we explain the request in plain English? 
• Have we identified the recipient and location accurately? 
• Can we explain what information is covered? 
• Can we explain what the recipient will do? 
• Do clients have a clear contact for questions? 

Security 

• Have we verified the provider’s controls? 
• Are our security claims documented? 
• Do we understand how access is granted, monitored, and removed? 
• Have we reviewed the requirements applying to sensitive identifiers? 

Operations 

• Is consent status recorded? 
• Does the workflow prevent disclosure before consent? 
• Do we have a defined route for clients who decline? 
• Are client-facing staff trained? 
• Is there an escalation route for unusual cases? 

How Can CPA Firms Identify Safe Outsourcing Partners When Client Data Confidentiality Is a Priority? 

There is no authoritative ranking of the “safest” outsourcing providers for CPA firms. Instead, firms should evaluate the controls, governance, and processes behind the provider. 

Before disclosing taxpayer information to an external team, CPA firms should assess: 

• How client data is stored, accessed, and transmitted 
• Whether role-based access controls are used 
• Whether secure virtual desktop or controlled-access environments are available 
• The provider’s confidentiality and NDA requirements 
• Disaster recovery and business continuity procedures 
• Security certifications and independent audits, where applicable 
• Processes for monitoring, logging, and reviewing user activity 
• How the provider supports compliance with applicable Section 7216 requirements 

For many clients, these controls matter more than the provider’s location. While a Section 7216 consent form authorizes a disclosure, confidence is built through transparency about how taxpayer information will be protected once that disclosure occurs. 

Conclusion

Section 7216 consent should not be treated as a signature to collect at the last minute. 

For CPA firm leaders, it is part of a wider operating decision. The firm must understand where tax information will go, who will access it, how it will be protected, and what happens when a client declines. 

A stronger process begins before the form reaches the client. 

It begins with a delivery model the firm can explain clearly, security controls it can substantiate, and a workflow that respects the client’s decision. 

When those elements are in place, the consent conversation becomes simpler, more transparent, and more likely to build confidence rather than uncertainty. 

The firms that navigate Section 7216 most effectively are rarely focused on the form itself. They focus on creating a process that clients can understand and trust. 

As more CPA firms explore offshore tax preparation to address capacity challenges, the conversation is increasingly shifting from “Do we need a consent form?” to “How do we create a secure, compliant, and client-friendly process around it?” 

That is where experienced tax outsourcing partners, including QX Accounting Services , can play an important role, supporting firms with established workflows, governance frameworks, and operational processes designed to help firms scale while keeping compliance and client confidence front and center. 

Planning to scale your tax team?

Explore how QX Accounting Services helps firms navigate Section 7216 while maintaining client trust.

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FAQs

Is Section 7216 consent always required? 

No. Treasury Regulation §301.7216-2 lists permitted disclosures and uses that may occur without taxpayer consent. The answer depends on the taxpayer, recipient, location, purpose, and information involved.

Is Section 7216 only about offshore tax preparation? 

No. Section 7216 governs the disclosure and use of tax return information more broadly. Offshore tax preparation is one important application.

Is consent required for another member of the same firm outside the United States? 

The regulations state that when information is furnished to a preparer in the United States and disclosed to an officer, employee, or member of the same preparer outside the United States or its territories and possessions, consent is required before disclosure.

Can Section 7216 consent be signed electronically? 

Yes. Revenue Procedure 2013-14 provides specific requirements for electronic signatures on electronic consents for Form 1040-series taxpayers.

Can Section 7216 consent be included in an engagement letter? 

The answer depends on the taxpayer and applicable consent rules. Professional sample materials distinguish between Form 1040 and non-1040 taxpayers and state that certain non-1040 consent language may be included in an engagement letter. Firms should not assume that the same format works for every taxpayer or disclosure.

How long does Section 7216 consent last? 

Applicable consent materials can specify a duration. Firms should follow the duration and content requirements applying to the specific consent instead of relying on a general policy. Revenue Procedure 2013-14 should be consulted for Form 1040-series consent requirements.

What are the penalties for violating Section 7216? 

IRS Revenue Procedure 2013-14 states that a Section 7216 violation is a misdemeanor that can carry up to one year of imprisonment, a fine of up to $1,000, or both, together with prosecution costs. It also identifies a related civil penalty under Section 6713.

What should a firm do when a client refuses consent? 

If consent is legally required for the proposed disclosure, do not make that disclosure. Follow the firm’s approved alternative workflow and explain any actual service implications accurately.