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May 25, 2010

Priviledge between you, your CPA and your Attorney and the IRS

Filed under: Taxes — Barry @ 7:14 am

Many people believe that EVERYTHING THEY TELL an attorney is priviledged; that they can say anything and the lawyer may not and will not repeat it.    (No we are not priests in the confessional).   Often much of the communications between a client and their attorney is privildged… often it is not.  The question is very complex and you need to get clarification as to what is and is not and what maybe is not priviledged.

In a recent appeal to the United State Supreme Court, the Supreme Court  declined to hear the appeal of Textron ( a maker of private jets).  The company had appealed a ruling by the First Circuit Court in the case (see Textron Case Endangers Tax Workpaper Protection). The IRS had requested tax accrual workpapers from the corporate jet manufacturer, including a spreadsheet compiled by its attorneys showing potential items of contention with the IRS and its chances of winning them. The company asserted a work product privilege and won two rulings against the IRS, including by a three-judge panel at the First Circuit Court. But when the full “en banc” court heard the appeal, it ruled in the IRS’s favor. The Supreme Court let that decision stand on Monday. See, Supreme Court denies Textron Tax Workpaper Appeal.

Now most clients are not Textron (oh that they should be), but this has implications for everyone.

When it comes to you and your CPA, or you and your Tax attorney, you need to be very clear on what is and is not, and what may and may not be priviledged.  Telling your Tax attorney that you murdered your mother… priviledged.  Telling your Tax attorney that you also stole $3M from dear dead mom… probably not priviledged.  Working on tax avoidance strategies… maybe privileged.

Know the boundaries of what is and is not covered by privilege.

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