A tax preparer cannot disclose or use a person's tax information for any reason other than to prepare a tax return. The preparer who does this may be subject to criminal fines and imprisonment. Freeman Law is a boutique tax, white-collar and litigation law firm. We offer unique and valuable advice, vision and experience.
Our firm is where customers go when the stakes are high and the problems are complex. There are many activities that are protected by the accountant-client privilege. Any communication between a client and their accountant that details the restructuring, business transaction, tax returns and much more. Communications between a customer or their representative and their accountant or accountant's representative are protected.
This privilege is so that an accountant can do their job without fear of being persecuted. Extends “the same confidentiality protections as common law”. To a communication between a taxpayer and any federally authorized tax professional, to the extent that the communication would be considered a privileged communication if it were between a taxpayer and an attorney. However, surprisingly, the privilege doesn't apply to preparing a tax return.
That, of course, raises the question of what exactly does it cover. You have codified an accountant-client privilege in tax matters, it is very limited in its protection of communications. Because of this limited scope, accountants who engage in sensitive conversations should always involve or consult legal counsel. In many situations, an attorney can use a “Kovel agreement” to cover up a conversation that is necessary to provide legal advice with attorney-client privilege.
Accountants who engage in sensitive conversations with clients risk becoming witnesses against them and may expose themselves to unwanted liability exposure. In addition, the privilege does not protect communications between a prosecutor and a customer simply for the purpose of preparing a tax return. Tax Audit Representation & Appeals Do you need help managing the auditing process? Freeman Law's team of dual-accredited attorneys and public accountants regularly represent taxpayers before the IRS and the Texas Comptroller. Our team also provides representations related to tax returns and helps taxpayers navigate state tax laws.
Our firm offers value-based services and provides practical solutions to complex problems. Schedule a consultation or call (21) 984-3410 to discuss our tax representation services. In addition, while federal law recognizes the accountant-client privilege, this privilege is extremely limited. The privilege applies only to advisors authorized by federal law to practice before the IRS.
In addition, the privilege does not apply to criminal proceedings or to communications related to tax shelters. If you are charged with tax offenses and your accountant is cited, the privilege will not apply. It is very likely that it will provide the government with what it wants to protect its reputation and credibility and, at the same time, avoid the risk of being found guilty of contempt. In addition, a tax return preparer may maintain a statistical collection of tax return information related to internal administration or in support of their tax return preparation business, or for genuine research or public policy discussions.
The intent of such a provision may be to protect confidential information provided to the CPA firm from being disclosed to other customer employees, but it may also restrict the CPA's ability to effectively perform a tax or consulting services contract. A tax return preparer cannot submit any tax return information outside the United States without the customer's prior consent period. So, if the exaggerated actions or claims of a tax preparer or accountant resulted in an audit or other tax proceeding against the taxpayer, it seems logical that they should fix it. Restricted disclosure is also allowed to a tax return preparer who is not in the signature of the preparer of the first tax return, but who lives in the United States and who prepares or helps prepare tax returns.
Individuals who provide services pursuant to a qualifying tax collection contract under section 6306 may, if they speak with a person who has identified himself as the holder of the name of the taxpayer to whom a receivable relates (within the meaning of that section), identify themselves as contractors of the Internal Revenue Service and disclose the contractor's business name and the nature, subject and reason for the contact. If you are facing a tax audit or a criminal tax matter, you should seek an attorney because only attorney-client privilege can provide the confidentiality that is required to defend yourself in matters of this type. The IRS imposes heavy penalties on tax preparers who disclose tax return information without their permission. For the purpose of applying subparagraph (A) (iii) to the subsections mentioned in that subparagraph, any reference in such subsections to state law, procedures or tax returns shall be treated as references to the law, procedures or tax returns, as the case may be, of municipalities that form and operate the governmental entity referred to in that paragraph.
Consequently, a CPA must enter into a contract with the third-party service provider specifically to maintain the confidentiality of covered taxpayer information, or obtain the customer's consent before disclosing the tax return information to the provider. A tax return preparer may use and maintain a list of customer contact information for limited business purposes, but there are several requirements and limitations for this use. After receiving a tax audit notice or some other indication that they are about to face criminal tax proceedings, many people are often tempted to return to the original preparer. While section 7216 of the IRC and section 301.7216-2 of the Treasury Regulations are complex, tax return preparers should familiarize themselves with these provisions and CPAs should be familiar with the Customer Confidential Information Rule, since violations can be prosecuted as a federal offense, resulting in in fines and result in disciplinary action under Circular 230 or the AICPA Code of Professional Conduct.
A tax return preparer uses information from the tax return when making recommendations or offering services to a taxpayer client based on information from the customer's tax return. You can file a civil suit for damages if you discover that the IRS or your tax preparer has released your tax information without your consent. Accountants who prepare their clients' tax returns receive all kinds of information from their clients, from the most mundane to the lewd. .