Do I Need An Attorney To Handle My Tax Problem?

Often times, people wonder whether they really need an attorney or whether an accountant can help them with their tax problems. Unfortunately, most people, including many accountants, fail to understand that, depending on the nature of the tax problem, the taxpayer's activities may subject them, at worst, to criminal liability and, at best, to potential disputes with the IRS. When Congress adopted the Federal Rules of Evidence, they could not reach agreement on legal privleges. Accordingly, Congress agreed that whatever privileges were in effect at common law at the time of the adoption of the Federal Rules of Evidence, those privileges would continue. However, at common law there was no accountant / client privilege. Accordingly, everything a taxpayer tells his accountant can be compelled to be disclosed in proceedings with the IRS, whether civil or criminal. While Congress did create a very limited tax practitioner's privilege, it does not apply if the accountant prepared the return or if the proceeding is criminal or has criminal potential. (Please see my article under the Articles Section of my web page ( http://www.DeLancettlaw.com/Articles.shtml)).

      However, case law, starting with a case called Kovel, has recognized a work product privilege when an accountant is retained by an attorney to assist the attorney in advising his client as to a proper course of action. Not surprisingly, the accountants who are retained by attorneys to assist them in these matters are referred to as Kovel accountants. In order for the privilege to attach, the client must retain an attorney and then the attorney retains the accountant as a consulting expert witness. Unfortunately, if the client has already met with the accountant or worked with the accountant in the past, it may be difficult to establish the privilege because it may be difficult to determine whether the accountant became aware of the information prior to or after the creation of the attorney / client relationship. Only those communications divulged to the attorney and the accountant after creation of the relationship are deemed privileged. They are deemed prvileged under the attorney / client privilege and under the attorney / work product privilege.Therefore, it is always best to consult with an attorney first. If the attorney deems your matter such that there is a low likelihood of litigation, either civil or criminal, then it may be safe to proceed with an accountant. However, you need to be sure that the accountant is knowledgeable and experienced in the areas of civil tax procedure and evidence. Also, you need to consider whether, if the efforts of the accountant are unsuccessful, you intend to pursue judicial remedies. In that case, it may well be in your best interests to retain legal counsel at the beginning of your matter. Finally, if you have any concern whatsoever as to criminal exposure, the only way to protect yourself is to consult with legal counsel.

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