Page 419 - TaxAdviser_2022

TAX PRACTICE & PROCEDURES
Author:
Kip Dellinger, CPA
Protecting a client’s
tax privileges is a
fundamental duty
of the CPA tax
professional, and it
is critical that the
CPA understand the
privileges that are
available to a
client-taxpayer.
36 August 2022
Protecting a
taxpayer’s privileges
Preserving legally recognized “privileges” “privileges” with regard to communica-
that shield what was said between tions with a tax adviser, or a lack of
client and accountant from compelled thoughtfulness with regard to com-
disclosure is a fundamental duty of the munications between the CPA and the
CPA tax professional. Generally, this tax client that otherwise should be “off
desire for privilege is to prevent a tax limits” because it is outside the scope
authority — for example, the IRS — of the CPA-client privilege, may result
from accessing communications and in significant harm to the client should
related work product, such as written the CPA be compelled to reveal com-
advice, analysis, and recommendations, munications to the tax authority or to
between the taxpayer and the tax adviser a court. This problem is exacerbated by
pertaining to a tax issue in dispute. Thus, the fact that taxpayers often believe their
it is critical that the CPA understand
communication with a CPA is subject
the privileges that are available to a to privilege similar to a communication
client-taxpayer when communicating with an attorney. Consequently, as a
matter of course, the CPA should advise
with a tax professional.
The scope of those tax privileges, the taxpayer of limitations that apply to
however, is limited at best and what the client might otherwise believe
nonexistent in many situations. is “privileged.”
Consequently, in the course of tax
While the attorney-client privilege
practice, the CPA should be ever does not extend to the CPA, it is
vigilant in recognizing when to refuse necessary to understand that privilege
in order to understand and apply any
to listen or to stop listening to a client
and refer the client to tax legal counsel related type of privilege that may apply
to prevent possible harm to the client. to client-CPA communications and
This includes, of course, both written related limitations.
communications such as email and oral
discussions. It is important to note that Elements of the
the many state accountancy laws that attorney-client privilege
address “client confidentiality” do not Basically, the privilege belongs to the
provide privilege protection regarding client, but the protection from disclo-
tax authority inquiries — that is, sure protects both the client and the
confidentiality and privilege protections lawyer from a compelled disclosure. The PHOTO BY SEAN GLADWELL/HEMERA/THINKSTOCK
are different creatures in the law, a fact communication protection is generally
that is sometimes misunderstood by limited to legal advice provided by an
both the client and the tax adviser. attorney in his or her capacity as an at-
A lack of knowledge on the part torney; also, the protection understand-
of the CPA of the nature of a client’s ably includes related documentation
The Tax Adviser