Attorney-client privilege
Why should I consult with a tax attorney before discussing my IRS tax issues with my CPA?
Engaging the services of a tax attorney before discussing your IRS tax issues with your CPA can be a strategically wise move. The attorney-client privilege, applicable to both civil and criminal IRS tax matters, plays a pivotal role in assisting you with resolving these problems. This privilege enables you to be completely forthright with your attorney, in exchange for which you can receive candid, tailored legal guidance.
It's crucial to recognize that the accountant's "tax preparation" privilege, as established by United States tax law, is considerably limited and does not apply to IRS criminal investigations. Consequently, this restricted scope can potentially lead to the government compelling your accountant to testify against you and disclose documents you've provided. From a professional standpoint, the government's ability to turn your own accountant into a potential adversary renders the accountant's "tax preparation" privilege less effective when compared to the comprehensive protection offered by the attorney-client privilege.
In addressing substantial IRS tax issues, tax attorneys often engage the services of accountants under the framework of a "Kovel letter," named after the case United States v. Kovel. In simple terms, your tax lawyer retains the accountant, rather than you, to assist with your IRS tax problem. This setup ensures that the accountant handles your tax accounting and return preparation while reporting to your attorney as a subcontractor. When managed correctly, this arrangement extends the umbrella of the attorney-client privilege to cover the accountant's work and communications.
It's worth noting that federal tax laws contain various essential exceptions governing the implementation of this distinctive professional relationship. Consequently, it is advisable to consult with a tax attorney regarding your IRS tax issue to safeguard your rights effectively.