So, have you heard any juicy stories lately? Have you told any? You know, like that income you forgot to report on your tax return, or fake deductions you took on your business? Do you think you have a privileged relationship with your CPA?
Whatever you do, don’t tell me! I don’t want to hear it! Yes, even though I am a CPA and am fully qualified to help you with your tax problems, please do not tell me your guilty tax secrets, especially if they involve criminal intent (aka you knew what you were doing was against tax law when you did it, and you did it anyway). Why? Because you and I do not have a privileged relationship, and if the IRS comes and asks me about anything – ANYTHING you told me – I am bound by law to tell them. You and I (or you and **any** CPA) do not have a privileged relationship, even if you hire one of us to help you catch up on back taxes, and I am bound to let you know that in advance.**
You’ve heard that familiar wording: anything you say can and will be held against you in a court of law? That’s the common Miranda warning, and I certainly don’t have any authority to arrest you (nor desire to do so), but the fact is that you should not tell your CPA anything you don’t want reported to the authorities.
So, who can help you if you have done something wrong, and you need to get your tax situation straightened out?
A Tax Attorney, that’s who! There is a concept called “attorney client privilege” which will protect the confidentiality of any discussions, admissions, or anything else you tell to a tax attorney, as long as you do so according to the “rules,” which the attorney can explain to you in a way that you understand. He can legally refuse to answer questions asked by any governmental authority, including the IRS, state taxing authorities, and any court of law. Not only can he do so, he is legally bound by his oath and licensing to do so, as your advocate.
Tax Attorneys are also better versed on the newer and more technical laws behind taxation (and many are also CPAs as well). Yes, as a CPA, I know the general rules and have the knowledge to help you file a good tax return, but when it gets down to the details of arcane and unusual tax situations, I can’t help you with those. Sometimes even a tax attorney can’t actually resolve the problem, and the situation has to be straightened out in court, and a tax attorney is qualified to do that. Interestingly, a CPA and an EA (Enrolled Agent) are also permitted to appear before the bench in tax court, but if it’s confidentiality you need, the tax lawyer is your guy.
If the worst happens and you end up in court, or if the IRS starts making demands, your tax attorney also has the ability and training to negotiate on your behalf. And while CPAs take training every year to maintain their license, the training that tax attorneys take centers more on the finer points of the newer laws.
It’s a good idea to pre-interview your accountant to make sure they are able to do what you need for them to handle. If the scope of the work you need done falls within the category of confidentiality mentioned above, you should go to a tax attorney. If you have a good relationship with your CPA he or she may be able to refer you to a good attorney. Otherwise, ask for references from other attorneys, the state licensing board, other CPA’s and other business owners. Just like you would in any business situation, be sure to ask about fees and expenses before you make any agreements with the attorney. And honestly, find one you like. If you discover you don’t like the tax attorney you are working with, you will never be satisfied with his or her work.
So, if you ever find yourself needing help with a serious tax problem, before you spill the beans to anyone, including your CPA, head for the tax attorney’s office first and get some confidential assistance.
Always remember: it’s your name that gets signed on the bottom line of the tax return, and it’s your responsibility to pay all of your taxes, so be sure you understand what your CPA, EA, or tax attorney is doing with your tax return.. If for any reason you feel like you are getting the run-around, request all of your records back -they are required by law to give them to you – and go to another tax professional).
To Recap:
- Your relationship with a CPA is not legally protected
- Tax attorneys can provide legally protected confidentiality
- When choosing a CPA, an EA, or an attorney, be sure to choose one you like and feel comfortable with.
**I use the term “You and I” loosely here for an example, as I am not currently in the public practice of accounting. Although I am a licensed CPA, the “public practice of accounting” requires certain permissions that I have held in the past, may hold in the future, but do not currently hold.
