In a recent Wilson Elser Client Alert, “A Trap for the Unwary Advertiser ,” Tom Manisero (Partner-White Plains) discusses a practice that can trip up accountants looking to use their current client list as a starting point for their advertising. While your clients undoubtedly can be fertile ground for expanding your practice, you have to be careful not to violate the Treasury Regulations implemented in connection with IRC § 7216, which protects confidential information obtained from 1040 clients.
As Tom explains, firms cannot use the names and addresses obtained from their 1040 clients to send out solicitations to perform non-tax services without the 1040 clients’ consent. That consent has to be obtained prior to the solicitation, cannot be granted retroactively and cannot be built into the engagement letter. Accordingly, firms need consent on the form prescribed by the IRS prior to sending any solicitations for non-tax services to clients whose only relationship with the firm is 1040 preparation. Otherwise, the unwary advertiser will violate IRC 7216, which actually amounts to a crime, albeit one that is rarely prosecuted.
An accounting practice isn’t worth much if it doesn’t have clients. As the saying goes, “if you’re standing still, you’re falling behind.” So, all firms need to attract new clients and retain and expand relationships with existing ones. Advertising can be good for your accounting practice, but be careful how you approach advertising to your 1040 clients, because violation of IRC 7216 could lead to unpleasant questions from the IRS Office of Professional Responsibility—and that’s not good.