re intentional and the defendant claimed were based on incompetence of the accountant. Both the physician and the law firm employing the accountant objected to the testimony of the accountant claiming attorney-client privilege and work product. This case reminds tax advisors, especially accountants, that they need to be very thoughtful about communications with clients. The attorney-client privilege protects communications made in confidence by a client to his or her lawyer for the purpose of obtaining legal advice. The work product privilege is broader and includes materials assembled and created in anticipation of litigation, which includes the IRS administrative process. The court noted that the accountant is, obviously, not an attorney and that there is no attorney-client privilege under federal law and that no state create privilege is recognized in federal cases. The Internal Revenue Code does contain an accountant privilege under Section 7525, but it is a limited privilege. See 26 U.S.C. §7525. An accountant can sometimes invoke the attorney-client privilege when working in tandem with an attorney so that the attorney can provide legal advice to the client. See United States v. Kovel, 296 F.2d 918 (2d Cir. 1961).A federally authorized tax practitioner can be any individual authorized to practice before the IRS (e.g., CPAs, attorneys, enrolled agents, enrolled actuaries). These authorized practitioners may assert the privilege under Section 7525 of the Internal Revenue Code. However, it doesn’t protect communications made as part of the preparation of the tax return. Therefore, seemingly confidential information may not be protected by the Code Sec. 7525 privilege if it is sufficiently connected to the preparation of the return. Also, the Code Sec. 7525 privilege only applies to civil administrative proceedings with the IRS (e.g., examinations or appeals) or litigation before the U.S. Tax Court or other federal courts. Criminal tax proceedings or any other nontax proceeding

1(a), 21028(a)]. Similarly, the federal tax practitioner privilege only applies in civil tax proceedings before the IRS and in federal court brought by or against the United States (see 26 U.S.C. Sec. 7525). In addition, the privilege does not extend to communications about tax return preparation [see United States v. APMG LLP, 237 F. Supp. 2d 35, 39 (D.D.C. 2002); United States v. Gurtner, 474 F.2d 297, 299 (9th Cir. 1973)].

er 20, 2023).) New hires in this unit will focus on those with financial services experience. (See IR-2023-172 (September 15, 2023) (reporting plans to hire 3,700 agents “well versed in the financial services industry”).) This announcement came on the heels of an earlier announcement that by the end of September 2023, the LPC will begin audits of 75 of the largest US partnerships, including hedge funds, real estate investment partnerships and publicly traded partnerships. (See IR-2023-166 (September 8, 2023).)Practice Point: Because of the significant resources devoted to the LPC program, these audits promise to be thorough and will be conducted by an LB&I exam team primed to find substantial audit adjustments. To successfully navigate these audits, partnerships should work to ensure that the IRS examination team sticks to the timeline, respond timely to all reasonable requests for information, and be prepared to assert all applicable privileges, such as the attorney-client privilege, Internal Revenue Code Section 7525 privilege, and work product where appropriate. We anticipate that aggressive IRS examination teams will try to obtain this information over a partnership’s initial objections on these grounds. It’s never too late to prepare for an IRS examination, and if you are a large partnership, it’s in your best interest to consult with your tax team now![View source.]

nformation submitted by insurers is kept confidential the Department has full authority to obtain it from the insurers, thus rendering the connection between section 6920 and the business of insurance too tenuous to support the Department’s reverse preemption claim.Practice Point:As these cases exemplify, the IRS is generally successful in defending its summons power. It must comply with what are called thePowellfactors, after the Supreme Court decision of the same name: 1) legitimate audit or collection purpose; (2) the information summoned is relevant to that purpose; (3) the information sought through the summons is not already in the IRS’s possession; and (4) compliance with procedural steps required by the IRC. Once these factors are established (usually by declaration of the issuing IRS agent or officer), the summoned party has the burden to quash or modify the summons. One viable defense is to assert an applicable privilege or other defense, such as attorney-client privilege or IRC section 7525, but these typically do not apply to financial records such as bank statements, account documentation,etc. Third parties are equally subject to the summons power of the IRS as taxpayers themselves.************ 131 AFTR 2d 2023-654 (Sup. Ct. 5/18/2023). https://www.supremecourt.gov/opinions/22pdf/21-1599_l5gm.pdf. 131 AFTR 2d 2023-1466 (3d Cir. 2023). https://www2.ca3.uscourts.gov/opinarch/213008pa.pdf The IRS considers some micro-captive structures to be abusive tax shelters. The LB&I division of the IRS has established the Micro-Captive Insurance Campaign which targets transactions in which a taxpayer “attempts to reduce aggregate taxable income using contracts treated as insurance contracts and a related company that the parties treat as a captive insurance company.”United States v. Powell, 379 US 48 (1964).[View source.]

296 F.2d 918 (2d Cir. 1961). I.R.C. § 7525(a)(1).Kovel, 296 F.2d at 922.See, e.g., Adlman, 68 F.3d at 1500.

BDO Seidman arose from summonses to BDO as part of an IRS investigation of BDO's compliance with Internal Revenue Code registration and list-keeping requirements for organizers and sellers of potentially abusive tax shelters. The clients sought to intervene and argued that, because these documents revealed their identities as BDO clients who sought advice regarding tax shelters and who subsequently invested in those shelters, disclosure inevitably would violate the statutory privilege protecting confidential communications between a taxpayer and any federally authorized tax practitioner giving tax advice under 26 U.S.C. § 7525, which was based on certain principles of the attorney-client privilege. The court held that because the accounting firm was statutorily required to disclose its clients' identities to the IRS, there was no expectation that those clients' identities would receive the protection of the attorney-client privilege.

He pointed out the different treatment of some privileges in shareholder litigation may mean that such information loses its privilege. Most notably, for U.S. federal tax purposes, IRC Section 7525 provides privilege for federally authorized tax practitioners who are not acting as attorneys. In ordinary interactions with the IRS, this privilege prevails, but it is explicitly confined to tax matters.

Even without documentation, it is important that business partners act in a manner that is consistent with a common legal interest, such as by keeping information confidential other than as between them. [1] Title 26 U.S.C. § 7525 (a) (1) provides that "the common law protections of confidentiality which apply to a communication between a taxpayer and an attorney shall also apply to a communication between a taxpayer and any federally authorized tax practitioner to the extent the communication would be considered a privileged communication if it were between a taxpayer and an attorney." This "tax practitioner privilege" is, therefore, essentially coterminous with the attorney-client privilege both in scope and waiver.

The clients invoked the privilege of confidential communications between an accountant and his client. See 26 U.S.C. § 7525. Because the information being sought did not include actual communications, the summons was permissible.

The IRS has broad authority to request information from taxpayers during an examination or in discovery in a docketed tax case. Oftentimes, such requests may cover documents or information that the taxpayer believes is exempt from disclosure under one or more of the following: (1) the attorney-client privilege; (2) the work product doctrine; and (3) the IRC § 7525 tax practitioner privilege. The taxpayer bears the burden of demonstrating that the asserted privilege applies.