Oregon common law does not recognize a privilege protecting the confidentiality of communications arising from the accountant-client relationship. Federal law, in contrast, creates an extremely limited privilege for tax advice by accountants and other professionals authorized to practice before the Internal Revenue Service. A common misconception is that the tax practitioner privilege is as broad as the attorney-client privilege.
It is not. The tax practitioner privilege applies only to "tax advice," as defined by federal law, and may be asserted only in noncriminal tax matters before the Internal Revenue Service or in federal court tax cases by or against the United States. Such demands are often made of accountants and others, such as financial advisers, bankers, planners, etc. Often such seizures are made incases where there is some evidence of tax evasion or an aggressive plan to avoid tax.
But even in an ordinary audit, tax officials often find useful ammunition in the hands of advisers. Typically, the taxman collects information by appearing simultaneously at the offices of the accountant, the advisers and the client and serving demands for the production of all relevant documents. If this occurs the accountant must consider carefully both the obligation to comply under the Tax Code and the obligation to the client to protect confidential communications and any privileged information.
If the lawyer claims that the client has solicitor-client privilege in respect of that document, the tax officer must place the document in a sealed package without examining or making copies of it and deliver it to the local Sheriff or to a mutually acceptable custodian. While accountant-client privilege has generally not been allowed by the courts, the doctrine of solicitor-client privilege has been expanded to include cases where the accountant is acting as an agent on behalf of the client and certain documents prepared by the accountant are in the hands of the lawyer.
Accountants should take a cautious approach in providing client information to the CRA to avoid unauthorized production of confidential and privileged documents of their clients. They should consider it advisable not to retain those that may be the subject of solicitor-client privilege and instead have them held by the lawyer.
Usually there is a demand by the CRA to produce the documents without delay. The subject of privilege and confidentiality of client documents in the hands of an accountant is difficult and must be handled with extreme caution. Fluently bilingual in English and French, Brigitte has broad experience in the areas of:. The legislation provision protects advice given by the accountant over risky tax strategies as well. Some states, like Colorado, Missouri, Florida and Pennsylvania, recognize the privilege.
In lawsuits filed in those states, the information will be treated as privileged unless the suit is filed in a federal court. If the legal proceedings involve federal issues, then the privacy of information will not apply. If the lawsuit deals with state matters, the federal government may apply state laws and so admit the protection of the data. In addition, states vary in who can claim the accountant-client privilege.
In some states, the accountant may file but, in others the privilege is seen as belonging to the client and he must assert it. The website CPA2biz also notes that third-party conversations are not protected.
Conversations pertaining to criminal activity do not fall under the umbrella of the legislation either. If the information in dispute is disclosed on a tax return, it may waive the privileged status as well as open any data underlying that information to investigation. There are some conditions that apply to documents and conversations that seek to fall under the privacy act.
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