IRC §7216 — Disclosure of taxpayer information

What practitioners need to know

§7216 makes it a federal crime for a tax-return preparer to knowingly or recklessly disclose taxpayer information without explicit, written, dated consent meeting the form and content requirements of Treas. Reg. §301.7216-3. When an AI tool transmits client return data to a third-party processor — which is what "sending the document to ChatGPT" is — §7216 applies.

The disclosure exception in §301.7216-2 covers many in-firm and software-vendor data flows. It does not cover consumer LLMs (ChatGPT, Claude, Gemini, Perplexity) unless the preparer has a paid B2B agreement with the vendor that specifically addresses §7216 disclosure. Free-tier or personal-account use of these tools on identifiable taxpayer data is a §7216 problem.

The consent template you need

A §7216 consent for AI-tool use must: (1) be in writing, dated, and signed; (2) name the specific AI vendor; (3) name the categories of return information disclosed; (4) state the purpose; (5) appear separately from other consents.

Safe harbors

Three patterns avoid the consent burden entirely:

• De-identified data. If the data sent to the AI tool is stripped of taxpayer identity before transmission, §7216 doesn't apply.
• On-device processing. AI tools that run locally on your machine (no data transmitted off-device) don't trigger §7216 — though stack-vendor AI features that synchronize with the vendor's servers do.
• Vendor-attested compliance. Some AI vendors carry §7216 compliance attestation in their MSA. Verified status is in our vendor matrix.