Kovel, 296 F.2d 918 (2d Cir. 1961), extended solicitor-client privilege to accountants who support lawyers. Louis Kovel, a non-lawyer, was a former IRS agent employed at a law firm specializing in tax law. In 1961, Kovel was summoned before a grand jury that investigated one of the law firm`s clients. Kovel declined to testify about the communications he had with the client, saying the communication was protected by solicitor-client privilege. The court found him contemptuous and sentenced him to one year in prison. Kovel appealed the verdict to the Second Circuit. The Court of Appeal sided with Kovel and ruled that communication was indeed privileged. Not related to legal services. The other common point for the denial of privilege is that the services of accountants are not sufficiently linked to the legal services provided. Such a denial is particularly evident when the I.R.C.

“extends the same protection of confidentiality at common law. communication between a taxable person and a tax collector approved by the State, in so far as the communication would be regarded as a privileged communication if it were to take place between a taxable person and a lawyer. [1] Remarkably, however, the privilege does not apply to the preparation of a tax return. [2] This, of course, raises the question of what exactly it covers. You can request a copy of our LPP communication protocol, which contains practical steps to take to protect current and future communications and documents that are subject to solicitor-client privilege (LPP) or accountant`s license, but may still be at risk of review. While companies across all industries face a turbulent economic phase, the compliance bar for accountants is high when insolvency looms on the horizon – NM. There are many activities protected by the accounting client privilege. Any communication between a client and his accountant that details restructurings, business transactions, tax returns, etc. Communication between a client or a client`s representative and his or her accountant or representative is protected.

This privilege serves to ensure that an accountant can do his job without fear of persecution. Appreciating the details of how and when the privilege applies to accountants will help tax professionals, as lawyers increasingly turn to accountants for help. This point first provides general context on how solicitor-client privilege applies to accountants, and then discusses how to structure (1) the accountant`s relationship with the lawyer and the taxpayer and (2) the type of accountant`s involvement in the taxpayer`s affairs, with the aim of ensuring that communication with the accountant is protected by solicitor-client privilege. The law firm Lewis Silkin explains how the law of privilege in investigations works The content of this publication is for reference purposes only and may not be up to date at the time of access to this publication. They do not constitute legal advice and should not be used as such. Specific legal advice on your particular situation should always be sought separately before taking any action based on this publication. Overall, however, the weight of authority is that disclosure related to tax filing is unlikely to be protected by privilege. [Citation needed] Cote participated in a taxpayer who had used a particular CPA for several years. When the CPA learned that the taxpayer would be subject to an IRS audit, it referred the client to counsel. In return, counsel asked the CPA to verify the net worth of taxpayers. As a result of the audit, the client submitted an amended tax return indicating an increase in income and taxes compared to the one originally reported. No statement was made.

The IRS issued a subpoena to the CPA, which said no response was required because of this privilege. The case was heard by the Eighth Circuit, which found that filing the amended tax return involved the disclosure of some of the requested information and therefore constituted a waiver of privilege. The court compared Kovel to an interpreter needed for the lawyer to communicate with a client who speaks a language that the lawyer does not understand. As the Court noted, “accounting concepts are a foreign language for some lawyers in almost all cases and for almost all lawyers in some cases.” Therefore, the court argued that “the presence of the accountant is necessary, or at least very useful, for effective advice between the client and the lawyer.” Kovel has extended solicitor-client privilege to communications with an accountant when the accountant (1) is “necessary” or “very useful” to (2) the lawyer in providing legal advice to the client. IN United States v. Kovel (296 F. 2d 918 [2d Cir. (1961)]), the Court of Appeals for the Second Circuit extended solicitor-client privilege to communications between a client and a person whom a lawyer hires to provide accounting-related services. The case involved Kovel, a former Internal Revenue Service agent who had accounting skills. Communication between lawyers and the accountants of their clients or other non-legal professionals is not privileged per se, but may occur when the communication is intended to “promote a function essential to the lawyer-client relationship or the continuum of legal advice of the lawyer,” the Saskatchewan Court of Appeal recently ruled in Redhead Equipment v.

Canada (Attorney General), 2016 SKCA 115 [Roux]. The accounting client privilege is a privilege of confidentiality, or more precisely, a set of privileges available in the federal and state laws of the United States. Accountant-client privileges can be divided into two categories: evidentiary privileges and unproven privileges. The taxpayer claimed that his communication with the accountant was preferred. The Ninth District noted that the privilege extends to the accountant only if the accountant assists him in obtaining legal advice. The Ninth Judicial District ruled that the preparation of tax returns was not legal advice and that, therefore, communication with the accountant was not privileged and could be used in court against the taxpayer. In another case, however, at the request of a lawyer, an accountant prepared a statement of assets that was considered privileged because it was necessary for the lawyer to provide legal advice to the taxpayer (Judson, 322 F.2d 460 (9th Cir. 1963)). Following Kovel, a case may be brought for the application of solicitor-client privilege to accountants when Ms.

ore recently appeared in In re Bieter Co. (16 F.3d 929 [8th Cir. (1994)]), the Eighth Circuit Court of Appeals upheld the application of solicitor-client privilege to communications between a lawyer and an independent contractor who was a real estate consultant engaged by the client to provide advice on the development of land, subject to litigation. The court concluded that, from the outset, the consultant was closely linked to the client`s attempt to achieve his objective. The consultant also acted as the client`s representative in meetings with potential tenants and local representatives, and was consulted for his expertise, much as if he were an external accountant to establish appropriate accounting and tax practices. In the view of the courts, maintaining privilege in the circumstances would encourage the free flow of relevant information to the client`s legal counsel where it was most needed. However, there are important limitations to the FATP privilege. Determining whether the accountant meets the necessary or very useful elements for legal advice depends on the facts and circumstances of each case. The investigation is largely aimed at determining whether the accountant assisted the lawyer in providing legal advice to the taxpayer or whether he or she instead provided accounting or tax advice to the taxpayer.

If the court finds that the accountant has provided accounting or tax advice to the taxpayer, the privilege does not apply. The courts examine the structure of the relationship between the accountant, the lawyer and the taxpayer and the nature of the accountant`s work. Therefore, it may be more difficult to prove that the accountant was needed if the lawyer is experienced and competent in the field in which the accountant works. The FATP privilege applies only to communications made on or after July 22, 1998. The privilege does not apply to written communications prior to October 22, 2004 between a government-authorized tax professional and a director, shareholder, officer, employee, agent or representative of a corporation in connection with the promotion of the direct or indirect participation of such a corporation in a tax haven. [9] Section 7525 was amended by the American Jobs Creation Act of 2004[10] to the effect that the privilege does not apply to written communications made on or after October 22, 2004, in which a government-authorized tax professional is involved in a tax haven in relation to the participation of an individual (not just a corporation). This is another limitation of privilege. Whether privileges apply is of particular importance when identical or similar issues are considered both internally and externally. Enforcement and supervisory authorities conducting an external investigation or initiating proceedings may know or suspect that documents produced in the context of an internal investigation may be of use to them. In recent high-profile cases, regulators such as the FSO have gone all the way to the Court of Appeal to obtain orders for the disclosure of documents prepared during internal company investigations. With respect to accountants, the Court noted that “there is no accountant-client privilege” and that “tax advisors do not provide legal advice.” On the contrary, information from accountants is protected by privileges only if the accountant “has been used as a representative of a client to obtain legal advice.” .