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Attorney-Client Privilege in Tax Practice

Most individuals whether they have been sent a dreaded letter from the IRS concerning a tax audit, or may need advice in the areas of financial matters, tax planning, or other money strategies, turn to their long time accountant or CPA for discussions. Knocking on this person’s door is of course understandable; however, in a lot of circumstances these talks may come back to haunt you.

Why?

Simply put, an accountant or CPA can be compelled by the IRS to testify against you. Specifically, any discussions with and/or documentation produced by your accountant or CPA is discoverable evidence and may be used to assist the IRS’s case against you and to slap you with an increased tax liability or possibly even jail time. In fact, the IRS has carefully spelled this whammy out for you in 26 U.S. Code 7525.

At first glance, when reading through the statute, you come across language that indicates that privilege is assigned to tax preparatory professionals – the general rule states:

With respect to tax advice, the same common law protections of confidentiality which apply to a communication between a taxpayer and an attorney shall also apply to a communication between a taxpayer and any federally authorized tax practitioner to the extent the communication would be considered a privileged communication if it were between a taxpayer and an attorney.

Reading on, you will come to the limitations of this regulation, which state with all certainty that when a more serious matter is at stake, especially one that involves criminal activities, this privilege is null and leaves you very exposed.

Advantages of Retaining a Tax Attorney

Among the many benefits of having a tax attorney speak for you before the IRS is that this representation carries with it the firmly established legal concept of attorney-client privilege. This protection ensures that any communication you convey to your attorney will remain confidential between you and him. Privilege remains such a long-standing and indisputable concept in our legal system, because it encourages forthcoming communications between the client and attorney.

Therefore, in a nutshell, the IRS cannot make your attorney divulge information or documentation that came from your discussions, no matter how serious the charges are against you. The umbrella of protection may in some cases even extend to an accountant’s work as well; however, the trick here is that your attorney engages the accountant as a kind of subcontractor for your case – not you. Hence, the long and short of it is that you are better off seeking a tax attorney especially if your circumstances may have the potential to get messy.

Why Dallo Law Group?

Our tax attorneys at Dallo Law Group have an abundance of experience handling legal matters before the IRS. We have never encountered or heard of attorney-client privilege being tested in court; however, we have seen things go sour fast the other way around when accountants and CPAs were forced to reveal incriminating details about their clients.

The bottom line for you: error on the safe side and hire a tax attorney to help you in your case. We specialize in all areas of tax law and offer a free consultation to review your details.