Try a Tax Lawyer Instead: Talking to an Accountant might not be Privileged

The accountant-client privilege is a legal concept that protects certain communications between an accountant and their client from being disclosed in legal proceedings. This privilege is designed to promote open and honest communication between clients and their accountants, which is essential for effective tax planning and compliance. However, the limits of the accountant-client privilege are not as well-defined as the much stronger attorney-client privilege, and the privilege can vary widely from state to state.

The attorney-client privilege is a much stronger privilege than the accountant-client privilege. The attorney-client privilege is based on the constitutional right to counsel and is protected by the Sixth Amendment of the U.S. Constitution. The privilege applies to any communication made between an attorney and their client in the course of providing legal advice. The privilege also applies to any communication made in anticipation of seeking legal advice. The attorney-client privilege is considered absolute and cannot be overcome by any other interest, such as the public interest in the administration of justice.

In contrast, the accountant-client privilege is not based on a constitutional right, and it is not considered absolute. The privilege is based on common law and state law, and it can vary widely from state to state. Some states do not recognize the accountant-client privilege at all, while others have varying degrees of protection. The privilege applies to any communication made between an accountant and their client in the course of providing accounting services, such as tax planning and compliance. However, the privilege is not as broad as the attorney-client privilege, and it can be overridden by other interests, such as the public interest in regards to the administration of justice.

The limits of the accountant-client privilege can be seen in several areas. For example, the privilege does not apply to communications that are made in furtherance of a crime or fraud. This means that if a client communicates with their accountant with the intent to commit a crime or fraud, the accountant-client privilege would not protect those communications from being disclosed in legal proceedings. Additionally, the privilege does not apply to communications that are made in the presence of a third party. This means that if a client communicates with their accountant in the presence of a third party, the accountant-client privilege would not protect those communications from being disclosed in legal proceedings.

Another limit of the accountant-client privilege is that it does not apply to communications that are made in connection with a tax return. This means that if a client communicates with their accountant in connection with a tax return, the accountant-client privilege would not protect those communications from being disclosed in legal proceedings. This is particularly relevant for tax disputes, as the IRS and state tax agencies have broad authority to access taxpayer information, including tax returns and communications between taxpayers and their accountants.

The limits of the accountant-client privilege can also be seen in the way that states approach the privilege. For example, some states do not recognize the accountant-client privilege at all. These states include Alabama, Delaware, Georgia, and Kansas. Other states have varying degrees of protection for the accountant-client privilege. For example, in California, the privilege is limited to communications made in connection with the preparation of financial statements, while in New York, the privilege applies to communications made in connection with any accounting services, including tax planning and compliance.

In light of these limits, it is important to understand the role that a tax lawyer at Safeguard Law, PLLC can play in providing tax advice. A tax lawyer can provide tax advice using the much stronger attorney-client privilege. This means that any communication made between a tax lawyer and their client in the course of providing tax advice is protected by the attorney-client privilege and cannot be disclosed in legal proceedings. Additionally, a tax lawyer can provide advice on how to structure transactions and communications with accountants in a way that maximizes the protection of the accountant-client privilege, while also ensuring compliance with tax laws and regulations.

In addition, a tax lawyer can also provide representation in tax disputes and litigation, where the limits of the accountant-client privilege may come into play. A tax lawyer can use their knowledge of the law and the legal process to advocate for their client and protect their rights and interests. This can include arguing for the protection of the accountant-client privilege in court, or arguing that the privilege does not apply in a particular case.

In conclusion, the accountant-client privilege is a legal concept that protects certain communications between an accountant and their client from being disclosed in legal proceedings. However, the limits of the privilege are not as well-defined as the much stronger attorney-client privilege, and the privilege can vary widely from state to state. Therefore, it is important to understand the role that a tax lawyer at Safeguard Law, PLLC can play in providing tax advice and representation, using the stronger attorney-client privilege, while also ensuring compliance with tax laws and regulations.

Footnotes

1. U.S. Const. amend. VI.

2. See, e.g., Upjohn Co. v. United States, 449 U.S. 383, 389 (1981) (“The attorney-client privilege is the oldest of the privileges for confidential communications known to the common law.”).

3. See, e.g., Swidler & Berlin v. United States, 524 U.S. 399, 403 (1998) (“The attorney-client privilege is intended to encourage full and frank communication between attorneys and their clients and thereby promote broader public interests in the observance of law and administration of justice.”).

4. See, e.g., In re Grand Jury Subpoena Duces Tecum, 670 F.3d 1335, 1338 (11th Cir. 2012) (“The privilege applies to any communication made between an attorney and a client in the course of providing legal advice.”).

5. See, e.g., United States v. Zolin, 491 U.S. 554, 562 (1989) (“The attorney-client privilege is one of the oldest recognized privileges for confidential communications.”).

6. See, e.g., Cal. Evid. Code § 953 (“There is no privilege under this article as to a communication that is relevant to an issue of breach, by the lawyer or client, of a duty arising out of the lawyer-client relationship.”).

7. See, e.g., N.Y. C.P.L.R. § 4503 (“There shall be no privilege under this article as to a communication relevant to an issue concerning the employment or retention of the lawyer or the lawyer’s services.”).

8. See, e.g., Ala. Code § 6-5-505 (“There shall be no privilege under this article as to a communication relevant to an issue concerning the representation of the client by the lawyer.”).

9. See, e.g., Del. Code Ann. tit. 10, § 2731 (“There shall be no privilege under this article as to a communication relevant to an issue concerning the representation of the client by the lawyer.”).

10. See, e.g., Ga. Code Ann. § 24-9-22 (“There shall be no privilege under this article as to a communication relevant to an issue concerning the representation of the client by the lawyer.”).

11. See, e.g., In re Grand Jury Subpoena Duces Tecum, 670 F.3d 1335, 1338 (11th Cir. 2012) (“The accountant-client privilege is not as well-established as the attorney-client privilege and is not recognized in all states.”).