This term paper offers an overview of the federal government's newest appointed privilege given to accountants, which is known as, the accountant-client privilege. For the many reasons that other professional-client privileges exist the rationale behind the accountant-client privilege is mainly, to give the client more options in seeking tax and estate planning advice. As with other privileged communications, there are exceptions as to what is privileged and what is not.
For whatever reason, many taxpayers have viewed this limited privilege as equivalent to the attorney-client privilege. Sadly, even some tax pros do not quite understand the protection afforded the client under Code Section 7525, and the few recent rulings are giving the tax preparers less sense of security. Communications between professionals and their clients other than those between an attorney and his or her client are not privileged under federal law. In cases involving federal law, state-provided rights to confidentiality of accountant-client communications are not recognized.
To get around this issue, in the past, in order for a CPA to seek communication privilege with their client an attorney would have to be hired in order to invoke the attorney-client privilege which would also extend to the accountant. This was a two-tier process, which in most cases would be costly and troublesome. In 1998 an Internal Revenue Service Restructuring and Reform Act was enacted. This reform contains a provision that created confidentiality privilege between clients and CPA's who represent them in non-criminal tax matters. Now taxpayers can discuss directly with their accountants riskier tax strategies without having the need to hire or seek the advice of a tax attorney.
CPAs and enrolled agents ...