Discussion:Buying Clients - Privacy Issues

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Jpw28 (talk|edits) said:

30 September 2011
I am looking to buy a retiring practitioner's clients and was wondering how to handle the privacy side of the purchase. I will want to obtain the previous year's tax return and any other information in the client file from the retiring preparer before meeting with the client and I would think there would be some privacy issues if this was just handed over without client consent? How is this type of transition typically handled. The retiring preparer will be writing a letter introducing me, etc but much assistance beyond that in terms of transition is not available (ie; joint meeting, etc)

Kevinh5 (talk|edits) said:

30 September 2011
Generally, you sign a non-disclosure agreement stating that you will hold the information in confidence. Check out the IRS' info on 7216 and you'll see that it is OK for the selling practitioner to disclose client's tax info to the buyer.

I wouldn't buy a practice without getting the client files.

DZCPA (talk|edits) said:

6 October 2011
The letter of introduction should ALSO include that all files will be given to you unless the tax payer disagrees.

Lisaw (talk|edits) said:

12 October 2011
Regarding client files, is there a general opinion as to how many years of client files one should get from the retiring practioner?

Does anyone who has purchased a practice, or clients in the past, have anything they would like to share that falls under things they wished they checked or known as part of due diligence but didn't?

Thanks for any feedback.

Kevinh5 (talk|edits) said:

12 October 2011
I would only want the past 3 year's returns. Plus info on any representation clients (IRS notices, 433As, etc.).

BFStax (talk|edits) said:

1 September 2013
I was wondering the same thing. Just the other day I was approached by a local tax preparer who will be giving me 5 clients for free. He says he sold his full time practice years ago but since has acquired a few small clients and is finally ready to leave the game for good. Selling the clients is too involved for their size/billings so he wants to hand them over to someone else.

I earlier found IRC 7216 and wanted to confirm the wording that makes this situation OK. Here is an excerpt from the code "Subsection (a) shall not apply to the use of information in the preparation of, or in connection with the preparation of, State and local tax returns and declarations of estimated tax of the person to whom the information relates."

My translation: since former preparer is giving me his clients, and I will only use their information to prepare their tax returns, then client consent is NOT required.

Am I correct on this?

Gazoo (talk|edits) said:

2 September 2013
I'll just address the social psychology here. When my doctor sold his practice he wrote all his patients and he highly recommended the doctor he sold it to; if memory serves there was a consent form with the letter that I returned to my doctor, but I don't really remember.

I don't understand why the "client donor" here would not also write these clients and highly recommend you. If any papers had to be signed, I don't see why they would object. I'm confused about the plan. Is this other accountant just going to hand you the files and let the clients find out by surprise? I don't see how that would offer any advantages other than that the clients may be (highly) offended. Why be cute about it? Maybe I'm not understanding your post.

If the donor doesn't want to write 5 letters, then he could call the clients and praise you to the skies, and ask them if he could send you their files, and then note his files that me made the calls? And since it's only 5 people, why can't the donor send the proper forms to them anyway as required by IRC, Regs. or whatever? Totally aside from issues of the law, I just don't think people like to be surprised,.

BFStax (talk|edits) said:

2 September 2013
I didn't mention it in my post, but he is going to be calling his clients to inform them of the transition. Obviously I don't want to be the first one to tell them for the reasons you mentioned. I actually met with him yesterday and he has already turned over the files, in large part because a couple of these clients have extensions due 9/15. But since I already have the files I was wondering the privacy issues, which appear to say I am fine for taking them without client consent.

AgwmTax (talk|edits) said:

2 September 2013
I have been though a similar situation and my suggestion would be to not accept any client files until you have either spoken to the potential client and discussed if they are willing to have you work on their extensions or the prior preparer has already obtained such a consent (documented).

Why do I say this. Generally if someone is getting rid of a batch of clients, they will shop it around to get a price for it before giving it away free because no one wants it. In my case I contacted a potential client only to find out that someone else beat me to it.

BFStax (talk|edits) said:

2 September 2013
AgwmTax, you bring up a valid point but if the clients were free, then even if someone beats me to a client I haven't lost anything but maybe a few minutes of time.

I am calling the old preparer tomorrow to discuss sending a letter along with his phone call so it is documented that I am the new accountant.

Thanks for all of the advice.

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