Considerations for accountants in responding to a subpoena for client documents
By: Nancy Reimer and Lori Eller
When a CPA or its firm is served with a subpoena requesting a client’s tax or financial information, there are best practices and steps they should take prior to responding to the subpoena. Federal and state law, as well as the American Institute of Certified Public Accountants’ (“AICPA”) Code of Professional Conduct do not allow a CPA to produce a client’s tax or financial information without written authorization.
Below are some steps to take in responding to a subpoena for taxpayer information:
- Obtain written authorization from your client. Federal law, under I.R.S. § 7216, requires written consent from the taxpayer before a tax preparer can disclose tax return information, unless a court order requires disclosure. Note: A subpoena from an attorney representing a party to a lawsuit is not a court order. The required consent must identify the purpose of the disclosure, the recipients of the return information, and the particular use authorized. Without written authorization, many states also prohibit disclosure of any client information.
Further, the AICPA Code of Professional Conduct Rule 1.700 likewise requires the written consent of the client prior to disclosing any confidential client information, as do most states. For example, in Massachusetts, tax preparers are prohibited under M.G.L. c. 62C, § 74, and M.G.L. c. 93H from disclosing client information unless (1) they obtain consent in writing by the taxpayer in a separate document, (2) are expressly authorized by state or federal law, or (3) are ordered to disclose the information by a court. The best practice is to contact the taxpayer and request they provide you with authorization. If they do not authorize you to produce documents, you should inform the party who sent the subpoena that you object to the subpoena and cannot comply with the subpoena because you were not given authorization.
- Redact all personally identifiable information (PII) from the documents you are producing. PII includes social security numbers, driver’s license or state-issued ID numbers, financial account numbers, and date of birth. Both state and federal law (5 U.S.C. § 552a) prevent unauthorized disclosures of such information.
- Exclude state tax returns if your state does not permit their disclosure. For example, in Massachusetts, M.G.L. c. 62C, § 21 prohibits the disclosure of state tax returns.
It is important to ensure that you comply with all applicable law and the AICPA Code of Professional Conduct before producing any documents pursuant to a subpoena or other external request for confidential client information.
Additionally, many insurance policies allow for coverage when accountants must comply with a subpoena for their clients’ documents. After receiving a subpoena, check in with your insurance carrier to see if you are covered to have an attorney assist you in preparing your response.
For further information or assistance with responding to a subpoena, please contact Nancy Reimer at firstname.lastname@example.org, or Lori Eller at email@example.com.