Most States recognize an accountant-client privilege where if you tell your accountant something the accountant should not be compelled to reveal what was discussed to the government or third parties. A major exception where this privilege does not apply is where the discussion involves potential criminal actions or criminal issues. In the tax field this could be where you are hiding money offshore, failed to disclose foreign bank accounts, did not report all worldwide income on your income tax returns or filed false returns with overstated deductions.
But thanks to attorney-client privilege, if you tell your lawyer about any of these problems, the IRS cannot make your lawyer talk or produce any documents or notes made by your lawyer. The theory behind the privilege is to encourage clients or potential clients (in both civil and criminal cases) to be forthcoming with their lawyers and get the advice needed to make an informed decision.
Because an accountant may still be needed to resolve your tax matter that has criminal repercussions or criminal exposure in sensitive tax matters, there is a tool that the tax attorney uses to extend the umbrella of the attorney-client privilege to the accountant. That tool is called a Kovel letter, named after a famous case of United States v. Kovel. The way this works is that your tax lawyer hires the accountant. The legal effect is that the accountant is still doing your tax accounting and return preparation but reporting as a subcontractor to your lawyer. Properly executed, it imports attorney-client privilege to the accountant’s work and communications.
If you are fence-sitting and can’t decide whether to disclose your past foreign account noncompliance to the IRS or if and how you should come forward to the IRS to correct previously filed false tax returns, you should not have discussions with your accountant about these issues. Instead speak with a tax attorney whom you can be forthcoming with and have the protections of confidentiality and exemption from disclosure to the government or other third parties.
Even if you end up not engaging that attorney, your conversation is still protected.
Whether and when to answer questions from the IRS, or whether to stand on your 5th Amendment rights, are questions that only a tax fraud lawyer can help you answer. Your financial well being, as well as your personal freedom may depend on the right answers. If you or your accountant even suspects that you might be subject to a criminal or civil tax fraud penalty, the experienced tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. located in Los Angeles, San Francisco and San Diego and elsewhere in California can determine how to respond to these inquiries and formulate an effective strategy.
Description: Working with a tax attorney lawyer is the best way to assure that your freedom is protected and to minimize any additional amount you may owe to the IRS.