If taxpayers wish to avoid being audited over their filings, engage in more sophisticated tax planning, or want more powerful representation, they can often turn to a Tax Attorney to help them prepare tax returns. This is especially common for individuals or small businesses with complex financial situations. It is important to remember that conversations regarding tax preparation and business decisions are not confidential if your lawyer is also a tax preparer.
Recent Ninth Circuit decisions suggest that courts will narrowly tailor attorney-client privilege, which could limit the protection taxpayers have on communications with tax preparers. In the unlikely event, you are charged with a criminal tax offense, many of your conversations could be brought to court.
The Tax Law Offices Of David W. Klasing can help you determine if privilege applies to communications you make with your tax preparer. Our skilled tax defense lawyers will be able to quickly identify which communication is protected by privilege. This can be crucial for your defense and your peace of mind. Contact us at 800 681 1295 to learn more.
Ninth Circuit Defeats Business Advice Privilege
The Ninth Circuit Court of Appeals released a decision in September that resolved a dispute between two different approaches to determining what material is a legal privilege. This decision is based on a heavily redacted case in which one party requested that the court use a broad privilege test.
The “because of” test is a test that would cover all communications made in anticipation of future litigation. It also includes documents that contain business advice. Their argument was based on the doctrine of work product privilege, which prohibits an opposing party from discovering documents prepared by an attorney to prepare for litigation.
This test was rejected by the Ninth Circuit, and they instead applied the narrower “primary purpose” test. This test examines the motivation behind the communication. The attorney-client privilege does not apply if the primary motivation was to give business advice.
The Ninth Circuit argues that the attorney-client privilege, as well as the work product privilege, have two distinct goals. The work product privilege allows litigators to freely develop their legal strategies and theories in private. Attorney-client privilege is what may or may not apply in this instance. It allows lawyers to freely communicate with clients about legal matters.
Consequences Of Ninth Circuit Decision Rejecting Business advice Privilege
You may not know how the Ninth Circuit’s recent decision could impact your life. You may have been under the impression that communications you had with your tax lawyer were confidential if they prepared and filed your tax returns for you. We suspect they are not, based on the Ninth Circuit decision.
You should be aware of the possibility that the government could subpoena or formally demand your communications with your tax attorney. If criminal tax charges are filed, the government may use these contents against you.
How can you get privilege for your tax defense issues?
We recommend that you contact a criminal tax defense lawyer to have a candid, confidential conversation about your tax situation. Clients who consult tax defense attorneys about potential or pending tax charges can find out what communications are protected by privilege so you don’t further expose yourself.
To protect privilege, tax defense attorneys can use Kovel arrangements. In the same case, the Kovel arrangement was created. It allows an attorney to engage an accountant to render legal services and extend the attorney-client privilege to them and their communications with clients. This protects the communications and prevents an accountant from being forced to testify at a later trial.
Privilege issues in an Eggshell Audit
Some audits require more care than others regarding privilege. While some audits are called “eggshell” or reverse HTMLshell audits they can easily turn into criminal audits. Eggshell audits occur when the IRS suspects that there are fraudulent tax code violations. These include income tax evasion or money laundering.
Reverse eggshell audits occur when both civil and criminal audits are conducted simultaneously. You should avoid giving up privilege on potentially incriminating communications, which could be used in a future criminal trial.
If your tax returns preparation is not privileged, can you make a voluntary disclosure?
You should act now to minimize any potential exposure to past communications you may have with your tax preparer. voluntary disclosure is a popular choice for this concern.
Note: As long as a taxpayer that has willfully committed tax crimes (potentially including non-filed foreign information returns coupled with affirmative tax evasion on U.S. income tax offshore income) Self-reports tax fraud through a domestic or offshore voluntary disclosure. The taxpayer is almost guaranteed to be brought back into compliance and can often get a break on civil penalties.
To ensure that the voluntary disclosure process is successful, it is important to hire a reputable and experienced criminal tax defense attorney. Only an attorney has the Attorney-client privilege and Product Privileges which will prevent you from having to testify against the professional you hired, particularly if they have prepared returns that must be amended in a criminal tax audit or prosecution.
Only an Attorney is authorized to enter into voluntary disclosures without engaging in the unauthorized practice of law, which is a crime in and of itself. Only an attorney who is trained in Criminal Tax Defense can fully understand the risks and rewards of voluntary disclosures, and how to protect yourself if you are not eligible for one.
Our firm is a unique and highly experienced Criminal Defense Tax Tax Attorney, EAs, and Kovel Tax CPAs. We provide a one-stop-shop to achieve the best and most predictable results while protecting your liberty and your net wealth. Read our testimonials to hear what our clients think about us.
If not handled properly, voluntary disclosure can cause more harm than good depending on the circumstances surrounding the tax violation. Do not attempt to participate in voluntary disclosure without first having a qualified dual-licensed Tax Defense Attorney and CPA on your side.
This article was written by Alla Tenina. Alla is a top tax attorney in Sherman Oaks, CA in Los Angeles California, and the founder of Tenina law. She has experience in bankruptcies, real estate planning, and complex tax matters. The information provided on this website does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only. Information on this website may not constitute the most up-to-date legal or other information. This website contains links to other third-party websites. Such links are only for the convenience of the reader, user or browser; the ABA and its members do not recommend or endorse the contents of the third-party sites.