Attorney-Client Privilege Tax Return Preparation: The attorney-client privilege tax return preparation rules for IRS Streamlined Offshore are very important, in order to best protect client confidentiality.
In 2014, the IRS developed the Streamlined Filing Offshore Procedures.
Since the representation involves both legal and complex tax preparation, clients benefit immensely from retaining a dually-licensed Attorney & Enrolled Agent or Attorney/CPA to handle the entire process, in-house.
Some attorneys without proper experience in this area of international tax law try to “fake it,” to the client’s dismay.
We get contacted numerous times each year by distraught Taxpayers who were misled by inexperienced counsel who misrepresented their prior legal/attorney experience, along with misguiding clients about the nature of Kovel (see below) — and are now in a much worse position than when they started this process.
As a result, their client’s attorney-client confidentiality was put at serious risk.
By using an outside CPA, the client (unnecessarily) jeopardizes their attorney client privilege.
We will explain how to best protect yourself and your attorney-client privilege.
Attorney-Client Privilege Tax Return Preparation (IRS Streamlined Offshore)
In recent years, the IRS has increased enforcement of offshore reporting.
Attorney-client privilege tax return preparation was never an issue until recently (past 5-years) when several inexperienced tax attorneys jumped into the market, and began misrepresenting prior experience they do not have — and referring cases to outside CPAs without fully explaining to their clients how this puts the attorney-client privilege at serious risk.
Several of these cases end up on our doorstep each year.
Examples of recent cases we took over from less experienced attorneys can be found here:
Streamlined Procedures (SDOP and SFOP)
The Streamlined Program is one of the more popular “tax amnesty” programs used by taxpayers worldwide. When a person hires a Tax Attorney for an international tax matter, the client requires both tax and legal representation.
Tax Attorney representation in the streamlined program has 3 main components to it:
Why is Hiring Dually-Licensed Counsel Important?
When it comes to streamlined disclosures, clients benefit greatly from using a dually-licensed attorney with advanced tax credentials and certifications — which are considered prerequisites for this specialized area of tax law.
The purpose of hiring a dually-licensed counsel is not to create attorney-client privilege for tax return preparation. Rather, the purpose of hiring a dually-licensed attorney is to PROTECT the attorney-client privilege.
When you speak with a dually-licensed Tax Attorney/EA or Tax Attorney/CPA that is handling your case in-house, you are in no jeopardy of breaking the attorney-client privilege on anything related to the legal aspect of the submission.
It is the legal aspect of the submission which the IRS scrutinizes in order to ascertain willful vs. non-willfulness.
Experienced dually-licensed tax attorneys charge a flat-fee for both tax and legal representation, to provide comprehensive tax and legal support throughout the process.
Less-experienced tax attorneys without litigation or trial experience do not have the experience to understand the inherent risk when you are referred to an outside CPA.
Referred by an Attorney to an Outside CPA?
If your attorney refers you to an outside CPA, your attorney-client privilege and confidentiality is at risk.
We see it all the time, and it goes like this:
- The Attorney misrepresents the purpose of Kovel to the client, and artificially reduces the fees
- The Attorney sends the client off to a pre-selected CPA for tax preparation (based on the Attorney’s ability to profit from the selection)
- The Attorney does not attend the meetings with the CPA
- The client has more tax questions, so the client asks the tax attorney (since they are usually retained on a flat-fee)
- Since the attorney is not dually-licensed, & without advanced tax credentials, the Attorney is unable to answer tough client questions
- The client speaks with the CPA, who charges hourly in addition to Attorney’s Fees and the discussion leads to more “legal matters.”
- The client has now risked losing the Attorney-Client privilege confidentiality.
By hiring a dually-licensed tax attorney, the client is protected from making legal statements to a non-attorney, since the entire matter is handled in-house — thereby eliminating the chance of jeopardizing the attorney-client-confidentiality privilege.
What About a Kovel Accountant Agreement?
Inexperienced tax attorney will false represent the nature of a “Kovel Letter.”
A Kovel letter does not extend attorney-client privilege to tax preparation.
When is Kovel Used?
The Kovel protection is extremely narrow (presuming it is not rejected by the court).
A Kovel letter is used in very-limited situations, in which an attorney wants to try to extend the attorney-client privilege on matters involving highly-complex accounting/tax situations only — not tax preparation.
Kovel is not statutory law, courts can reject Kovel, and Kovel does not provide confidentiality in routine tax matters — such as when an accountant prepares tax returns.
If the communications/materials were made for the purpose of obtaining accounting services, or if the advice sought was really the accountant’s rather than the attorney’s, no privilege exists.
Can a Kovel Agreement be Rejected?
Yes. A Kovel Letter is not statutory law, and can be rejected by courts.
Golding & Golding: About our Firm
We specialize exclusively in international tax, and specifically IRS offshore disclosure.
We have successfully represented clients in more than 1,000 streamlined and voluntary offshore disclosure submissions nationwide and in over 70-different countries. We have represented thousands of individuals and businesses with international tax problems.
We are the “go-to” firm for other Attorneys, CPAs, Enrolled Agents, Accountants, and Financial Professionals across the globe.
- Learn more about the Board-Certified Tax Lawyer Specialist credential
- Learn more about the Enrolled Agent credential
- Learn more about Golding & Golding’s Case Accomplishments
- Learn more about Golding & Golding Testimonials from prior clients
Less than 1% of Tax Attorneys Nationwide Are Certified Specialists
Sean M. Golding is one of less than 350 Attorneys (out of more than 200,000 practicing California Attorneys) to earn the Certified Tax Law Specialist credential. The credential is awarded to less than 1% of Attorneys.
How to Find Qualified Streamlined Offshore Counsel
Experienced tax attorneys in this field will have the following credentials/experience:
- 20-years experience as a practicing attorney
- Extensive litigation, high-stakes audit and trial experience
- Board Certified Tax Law Specialist credential
- Master’s of Tax Law (LL.M.)
- Dually Licensed as an EA (Enrolled Agent) or CPA
Recent Golding & Golding Case Highlights
- We represented a client in an 8-figure disclosure that spanned 7 countries.
- We represented a high-net-worth client to facilitate a complex expatriation with offshore disclosure.
- We represented an overseas family with bringing multiple businesses & personal investments into U.S. tax and offshore compliance.
- We took over a case from a small firm that unsuccessfully submitted multiple clients to IRS Offshore Disclosure.
- We successfully completed several recent disclosures for clients with assets ranging from $50,000 – $7,000,000+.
Interested in Learning More about Golding & Golding?
No matter where in the world you reside, our international tax team can get you IRS offshore compliant.
Golding & Golding specializes in FBAR and FATCA. Contact our firm today for assistance with getting compliant.